Corporation tax causes "record surplus"

Public sector finances were given a boost in January thanks to a surge in corporation tax payments from businesses, raising hopes that the government will meet its fiscal targets this year.

Official figures show that there was a record surplus in net receipts of £14.1 billion last month after tax receipts outstripped government spending.

This is up on last January's surplus of £11.8 billion and also comes in above analyst's expectations of a £10 billion excess in government funds.

Corporation tax payments have been largely responsible for the improvement, the figures show. They were up 22 per cent on January 2007.

However, despite the unexpected surplus some economists believe that the government will still miss its 2008 fiscal targets. They point to the slowing economy, which is likely to weaken profit growth and impact on corporation tax receipts going forward.

Andrew Lilico, the managing director of Europe Economics, told BBC Radio 5 Live that a downturn in the economy could take the government "way over" projected borrowing levels.

"So instead of being at £38 billion like they're expecting to be in terms of public borrowing, there are people now saying they might get to £100 billion," he remarked.