January 2025 delivered a record-breaking fiscal surplus, driven by strong self-assessed tax receipts. The public sector recorded a £15.4 billion surplus, the highest for any January since records began in 1993. Similarly, the budget surplus reached £24.6 billion, surpassing last year's figure and setting a new benchmark since records began in 1997.

Tax revenues were a key driver of this fiscal strength. Self-assessed income and Capital Gains Tax receipts totalled £36.2 billion, £3.8 billion higher than a year earlier, marking the largest January intake since records began in 1999. Despite this, public sector borrowing for the financial year stood at £118.2 billion, £11.6 billion higher than the previous year, making it the fourth highest on record.

However, debt remains a concern. Public sector net debt reached 95.3 percent of GDP, a level not seen since the early 1960s, while public sector financial liabilities increased to 82.7 percent of GDP. Despite the strong monthly surplus, the central government net cash requirement fell to £15.2 billion, a £4.3 billion decline from last year, reflecting ongoing fiscal pressures amid long-term borrowing concerns. The latest update takes the RPI to 39 and the RPI-P to 29, meaning that economic activities are well ahead of market expectations in the UK economy.

The public sector net borrowing requirement (PSNB) is the difference between the sector's receipts and expenditure and so provides a simple measure of government fiscal policy. In response to the global economic crisis in 2008/09 the UK government introduced a number of measures designed to show the underlying state of public sector finances by omitting temporary distortions caused by financial interventions. It bases its fiscal policy on these measures. To this end, the underlying gauge of government borrowing watched most closely by financial markets is the PSNB-X which takes overall net borrowing (PSNB) but excludes public sector banks.

Changes in public sector finances can be used to determine the thrust of the government's fiscal policy. Generally speaking when the government has a rising deficit (or falling surplus) it is loosening its fiscal stance with a view to boosting economic activity. When its deficit is falling (or surplus rising), fiscal policy is being tightened in order to slow economic growth. However, sometimes changes in government financial positions can be due to factors outside of the government's control and do not signal an explicit shift in policy. This means that great care is needed in interpreting the data.