Deferred Bonuses Hand Osborne Tax Windfall

A windfall from bonuses deferred by top earners has helped public sector net finances show a surplus of £8.8bn - the highest for seven years.

The Office for National Statistics (ONS) said the surplus in January was up £2.3bn on the same month last year, thanks to record self-assessment income tax receipts of £12.3bn.

The performance can be partly explained by top-rate income tax earners booking bonuses when the rate stood at 45%, following the Government's cut from 50% in April 2013.

It was also helped by a £3.6bn revision for the public finances for April to December, the ONS said, with an EU rebate of £1.2bn accounting for a large chunk of the cash.

The Treasury is normally in the black in the first month of the year and the earnings took total borrowing for the fiscal year to date to £74bn, £6bn - or 7% lower - than the same period last year.

Crucially for Chancellor George Osborne, it brings borrowing more in line with revised forecasts for the 12 months as a whole, which are published by the independent Office for Budget Responsibility (OBR).

Income tax and capital gains tax saw a record month, up 6.1% in January to £26.7bn, the Government spent £1.5bn less than expected though stamp duty on land and property fell year-on-year for the first time since April 2012.

Mr Osborne said: "January saw the largest monthly surplus in the public finances since the crisis, putting us on track to meet our borrowing forecasts and halve the deficit as a share of GDP this year.

"Coming in a week where we have seen the employment rate reach record highs while the inflation rate has reached record lows , today's good news is further proof that the Government's long-term economic plan is working.

"But in an uncertain world economy, all of this progress will be at risk unless we carry on working through the plan that is delivering stability and rising living standards."

But Labour - which has been locked in a row with the Government on tax avoidance - accused Mr Osborne of short-changing the public purse by reducing the top rate of income tax in the first place.

Shadow chief secretary to the Treasury, Chris Leslie, said: "These figures show George Osborne has broken his promise to balance the books by this year.

"His failure on the deficit is because falling living standards over the last five years have led to tax revenues falling short. This government is now set to have borrowed over £200bn more than planned.

"As the ONS says, today's figures are distorted by bonuses at the top which were delayed from 2012/13 to 2013/14 to take advantage of the top rate tax cut.

"This is something which has cost the taxpayer hundreds of millions of pounds."