PSBR on track to beat forecast

The Government's finances are on track to beat the borrowing requirement forecast in the Budget. The Public Sector Borrowing Requirement was in the black by £2.99bn last month, according to figures published yesterday. A surplus is normal in January, the most important month for corporation tax receipts, but the figure was better than expectations.

Public sector borrowing so far this financial year has reached £20.1bn - £9.5bn lower than at the same stage last year. The total for 1994/95 is likely to be lower than the £34.3bn Treasury forecast.

Corporation tax revenues were £6.1bn, £1bn higher than a year earlier. The recovery in profits and running-down of accumulated losses to set against tax have boosted the figure.

The strength of the recovery, bringing low inflation combined with falling unemployment, has also helped to contain spending. Last month outlays were only 6.3 per cent higher than last year, compared with total tax receipts up 11 per cent. The PSBR is expected to continue on its downward trend, making tax cuts possible next Budget.

Minutes of the 28 December meeting between Chancellor Kenneth Clarke and Eddie George, Governor of the Bank of England, showed the Governor to have been concerned about some signs of higher inflation. Mr Clarke pointed out that previous base-rate rises were affecting the economy. They agreed to hold interest rates unchanged for the time being. Base rates subsequently rose on 2 February.

Separate figures yesterday confirmed that the boom in exports is continuing. Motor vehicle production rose 4 per cent in the three months to January. Home production was down 8.7 per cent but production allocated for export increased 21.5 per cent, to a level 72.1 per cent higher than a year earlier.

Export sales were up 14.7 per cent in the quarter and a staggering 86.6 per cent in the year.