The BBC reported yesterday that:
A surge in capital gains tax, employers' National Insurance contributions and a boost in income tax receipts helped buoy the government's finances last mont.
An uptick in tax receipts, which far outstripped spending, created a £30.4bn surplus in January.
Technically, this is right. What is wrong with it is that it is made to sound so comforting. It sounds like prudence. It sounds like the government is finally “living within its means”. And that is precisely why it is so misleading. Just about everything in the report, of which others of a similar type were found right across the media, was wrong. That needs explanation.
First, the story rests on an assumption that runs through almost all mainstream economic commentary, which is that the government's finances are like those of a household. The claim is:
- Spend less than you earn, and things are good;
- spend more than you earn. and things are bad.
That idea is intuitive, but it is wrong for a currency-issuing government such as the UK's. The government spends by creating money. Then taxes are used withdraw money from the economy. In that case, a monthly surplus does not tell us that the government is financially strong. It tells us that, in that month, it took more spending power out of the economy than it put in.
Second, there is nothing inherently good about the government taking more out of the economy than it puts into it. Whether that is wise depends entirely on economic conditions. At a time of stagnant wages, collapsing local authority services, underfunded hospitals and unaffordable housing, a fiscal surplus may be a sign not of success but of neglect. No one discussed that yesterday.
Third, there is also a basic accounting reality that this kind of reporting always ignores. The economy is made up of four sectors:
- government,
- private, split between:
- households, and
- businesses, and
- foreign.
As sectoral balance analysis shows, their financial balances must sum to zero. If the government runs a surplus, the private sector and/or the rest of the world must run a deficit. That is not a theory. It is arithmetic. A £30 billion government surplus means that households and businesses together lost £30 billion of financial wealth in January.
Fourth, this matters. It means a surplus can coincide with rising household debt, falling savings, and declining demand. It can signal the squeeze on living standards that so many people in the UK feel today. Calling that good news is, at best, careless.
Fifth, there is another issue. January almost always produces a surplus because of the structure of the tax system. Self-assessment income tax is paid in January, as are many capital gains tax liabilities. It is always a month of strong tax receipts as a result. The Office for National Statistics regularly warns that single-month figures are volatile and should not be over-interpreted. Yet headlines are still written as if a January surplus is an economic turning point. It is not. It is a seasonal artefact.
Sixth, as importantly, the BBC framing repeats another persistent myth, which is that that tax receipts boost government finances. This is not true. As modern monetary theory shows, in a modern monetary economy, taxes do not fund spending in the way a household's income funds its outgoings. Taxes serve other purposes:
-
They create demand for the currency.
-
They help control inflation by withdrawing spending power.
-
They redistribute income and wealth.
-
They shape behaviour and social outcomes.
The real questions are therefore about fairness, distribution and economic stability. Are the taxes that have been paid progressive? Are they reducing inequality? Are they dampening inflationary pressures? Are they supporting public services and social security? None of this is asked. Instead, we get a narrative about balancing the books.
Seventh, that narrative feeds directly into the obsession with growth. The article notes that economists warn the public finances remain “finely balanced” because growth is weak. This implies that public services depend on economic growth to be funded. They do not. If real resources exist, whether they be labour, buildings, materials and equipment, then a currency-issuing government can always pay for them. The constraint is physical capacity, not money. The question is whether we organise our economy to provide those resources, and not whether January tax receipts happened to be high.
This is why such reporting is politically significant:
- It shapes public understanding.
- If people are told that surpluses are virtuous, they will tolerate austerity.
- If they are told taxes fund spending, they will accept cuts when growth slows.
- If they are told the government must behave like a household, they will assume public services are luxuries rather than democratic necessities.
And what gets hidden?
-
Under-investment in health, housing and education.
-
Rising inequality, masked by higher capital gains tax receipts.
-
The squeeze on households when taxes rise but wages stagnate.
-
The political choices that determine fiscal policy.
The result is a conversation about accounting numbers instead of lived experience.
We should be asking different questions:
- Are hospitals staffed?
- Are schools funded?
- Are homes warm and affordable?
- Are pensions and social security adequate?
- Are we investing in the green transition and in care for an ageing population?
- Are we reducing inequality?
Those are the measures of economic success. Not a single-month surplus.
So let me be clear about the conclusions.
A January surplus does not tell us the UK economy is healthy. It does not prove fiscal prudence. It does not justify austerity. It does not show that growth must precede public service funding. What it does show is how entrenched a flawed economic narrative remains in our media.
If we want a politics of care rather than a politics of accounting myths, we have to change the story we tell about public finances. That means:
- challenging the household analogy,
- teaching sectoral balances,
- focusing on real resources and outcomes, and
- demanding that economic reporting addresses inequality, public investment and democratic choice.
Economics should illuminate reality. Too often, as here, it still obscures it. And until that changes, we will continue to make bad policy based on comforting but entirely misleading headlines.
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Brilliant take down of complacent cosy reporting – please send to BBC economics editor
Funny how despite BBC’s obsession about ‘balance’ and ‘impartiality’ they never ask anyone like you to provide it.
Might you send it?
Thank you all for another pertinent article which which is, as disturbingly usual, so much more accurate and clear than the “economics” presented by, with exception of “The National”, the cartel of misleading/deceptive “baby food” servings from the main stream media, not least the alleged “public service” B. B. C.
Prviously you put forward the recommendation that the B. B. C. should be mutualised. Might it be possible for you to briely elaborate on this proposal?
We will be, next week.
It’s not done yet, though.
When I saw the figure, all I could think of was ‘All that blasted money that could be in the economy providing jobs and hope right now’.
And then on C4 news they had a ‘financial expert’ say how reassured the bond markets were by it all, then I got a bit sweary and shouty and upset the cat who was sleeping in front of the fire and then I felt all bad about that and had to go for a walk……………….but then I could not go out for a walk because it was pissing it down outside due to global warming……………..I think you get the picture……………….
🙂
How do we change the narrative in mainstream media? The general public will lap up what they’re being told by those media channels they have access to. For example, my father-in-law takes what the Daily Mail tells him as gospel. The BBC helps entrench those views. It’s impossible to persuade him otherwise because, “they tell the truth”.
Only by talking about the alternatives.
I have sent the following letter to the BBC’s economics editor and the author of the article. I am also submitting a complaint of bias to the BBC (though past experience suggests this will be ignored).
I wish to complain about the following misleading article.
https://www.bbc.co.uk/news/articles/c93w4egd3gzo
This presents the government surplus as positive, as if it is a good thing for the economy. In doing so it misrepresents the actual situation and perpetuates political bias.
Yes, the article is technically correct that government tax receipts exceeded government spending in January and by more than last year. But the positive spin of the article implies that taxes fund spending, which is not true. It treats the government as a household, in which tax receipts should exceed borrowing, which is not true. It suggests that a government surplus is healthy, which is not necessarily true. A surplus doesn’t mean the government is being prudent. A government surplus means that the rest of the economy has reduced spending, which is bad.
Furthermore a government surplus tends to happen every year because of the timing of HMRC returns so, even if a government surplus were good which it is not, it’s merely a seasonal variation.
Please please will the BBC economics reporting try to take account a range of views and not merely promote one political, and false, narrative that the government acts like a household.
For more information see: https://www.taxresearch.org.uk/Blog/2026/02/21/januarys-record-tax-receipts-the-real-story-that-was-not-told/
Best regards,
Many thanks, Tim.
It should also be a reminder that the fiscal headroom is nonsense.
Since there’s no hard stop on money production, there’s no need to have a buffer baked into the spending plans at all, let alone an enlarged one because of ‘increasing uncertainty’.
It should spend according to where it estimates finances will end up, and as this shows it will sometimes do £6.3bn better than expected, it’s not only downsides.
The problem with the fiscal headroom is that’s money that could support hospital services, improve education, support households or businesses. When it holds £10bn+ in reserve it impacts support for growth and the economy, making under-runs and even systemic collapse more likely as more will hit their tipping point where they fail with the risk of triggering further failures.
Agreed
I have sent the following letter to The Guardian
To the Editor
The Guardian on February 20th reported the UK governments fiscal surplus of £30bn in January (“Brighter Uk economy gives Reeves a springboard for March statement”). This echoed the same message from other parts of the media, suggesting that this is good news for the economy.
To the contrary, it is not good news at all. Basic double entry accounting tells us that one person’s spending is another’s income. Every debt is matched by a credit. Apply this simple objective fact to the economy as a whole and the macro-economic corollory is that government spending (fiscal deficit) is matched by a domestic private sector surplus.
A £30bn government surplus means that the domestic private sector is £30bn poorer.
In some economic circumstances a government surplus may be necessary to prevent the economy from “over heating” but it is a disaster at a time of stagnant wages, collapsing local authority services, underfunded hospitals and unaffordable housing,
The UK is not going to enjoy any economic growth whilst the government is obsessed with “balancing the books” and running a government surplus. Instead, government policy is condemning the UK to continuing decline. No wonder people are angry.
Thanks, Jim.
I notice yesterday also that there are strongly recovering retail sales….driven by antiques and art…..ffs.