- Retail sales rise 1.7% in January with food shops being the biggest beneficiary
- Record self-assessment tax income delivers a chunky £15.4 billion surplus in public sector finances
- The surplus is the largest since records began but smaller than that forecast by the OBR in October 2024
Danni Hewson, AJ Bell head of financial analysis, comments on a jump in food sales in January and record self-assessment tax income:
RETAIL SALES
“Today feels like a cup half full kind of day, though it will depend on your personal circumstances whether you are feeling optimistic or pessimistic about the economy and your own finances.
“After a torrid quarter for the retail sector at the end of 2024, sales in January picked up considerably, but consumers were still cautious and still spending primarily on essentials.
“As December’s cheer gave way to January’s gloom people hunkered down at home, opting to cook for themselves. This bolstered supermarkets and speciality food stores which experienced the largest sales jump since lockdowns forced people to stay indoors.
“This time it was cash not Covid which appeared to force people’s hand – a separate survey on consumer confidence shows people are minded to save rather than spend, putting a bit aside for a rainy day. That lack of confidence was a factor behind a fall in non-food sales, with people choosing not to splurge on big-ticket items or even a new wardrobe staple.”
PUBLIC SECTOR FINANCES
“Many could have been saving up in order to pay off their tax bill due at the end of January.
“The combination of fiscal drag and high inflation has pushed many people up into a new tax bracket and there will be families who had to file a tax return for the first time because they needed to pay back child benefit. The cost-of-living crisis also meant many people turned to a side hustle or sold off unwanted items on sites like Vinted and that extra income may well have seen them hit with a tax bill for the first time.
“Initial estimates show a record amount of self-assessment income was due in January. At £25.9 billion that figure is £4.2 billion more than last January, but crucially £3 billion less than the OBR had forecast just a few months earlier.
“January is often a month when the amount coming into the Treasury exceeds what’s going out and if you’re in that glass half full mood this record-breaking surplus is a much needed boon for the chancellor. But it is still significantly smaller than the surplus the OBR had anticipated back in October and borrowing levels are still uncomfortably high as all those pay rises, inflation linked benefit increases and rising interest payments take a good bite out of the tasty tax treat.
“Whichever way you view the deluge of data that’s hit us today, one thing seems pretty clear – it will do little to dampen speculation that Rachel Reeves may have to dole out some unpleasant medicine alongside her spring statement.”
