Britain has finally swung back into the black on day-to-day spending thanks to a jump in the tax take and years of austerity.
The current budget – which includes expenditure such as running hospitals, but not one-off capital costs such as major building projects – ended last year with a £3.8billion surplus, its first since 2001.
It is a major milestone on the road to rebalancing the nation’s books after costs surged and receipts dwindled in the Great Recession following years of tax-and-spend policies under Labour.
The figures are likely to pile pressure on Chancellor Philip Hammond to loosen the purse strings and offer tax breaks and other sweeteners in his Spring Statement later this month.
The figures are likely to pile pressure on Chancellor Philip Hammond to loosen the purse strings and offer tax breaks and other sweeteners in his Spring Statement later this month
But Treasury officials have insisted there will be no change of tack, with neither tax reductions nor spending boosts expected.
Returning the current budget to a surplus was a key target of former Chancellor George Osborne, but ultimately took two years longer than he had hoped.
When a Tory-led government came to power in 2010, they inherited a deficit that was £100billion a year earlier.
Mr Osborne began a programme of deep public sector cuts to restore Britain’s reputation for fiscal competence, including a seven-year cap on pay.
His former chief of staff Rupert Harrison, who now works for investment company Blackrock, said: ‘The fact that the UK has a bit of fiscal wiggle room now as it faces uncertainty from Brexit is entirely the result of a huge and consistent focus across government on reducing the deficit over many years.
Mr Osborne began a programme of deep public sector cuts to restore Britain’s reputation for fiscal competence, including a seven-year cap on pay
‘It’s easy to forget quite how big the fiscal crisis was that we faced just a few years ago.’
The Treasury’s job has been made easier by an unexpected jump in tax receipts, particularly in the crucial month of January when self-employed workers file their returns.
A surge in tax payments helped the state pocket a £15.8billion surplus in the first month of 2017.
It was £14.8billion into the black again this January, suggesting this good fortune will continue as the global economy strengthens and growth picks up.
The figures are embarrassing for the Office for Budget Responsibility watchdog, which predicted as recently as November that Britain would remain stuck with a current deficit until 2019-20.
It is now expected to significantly upgrade its forecasts for the public finances in its next report on the economic outlook this month.
However, Treasury sources believe there is no room for complacency.
When capital spending on infrastructure and other big-ticket items is included, the country borrowed £17.6bn last year – and the national debt stands at more than £2trillion.