Official figures released last week showed that public finances were in a much better state than thought. A surge of income tax and corporation tax revenues in January alongside a large downward revision to government borrowing figures for the end of last year have transformed the assessment of public sector deficits this financial year.
Income tax receipts were 14 per cent higher than last January, while corporation tax revenues were 22 per cent higher, reflecting increases in profitability across the board. However, income taxes were boosted by a 25 per cent rise in receipts from self-assessment which reflects income in 2006-7 and not that earned this year.
Although fears about a more pronounced structural deterioration of the public finances have been allayed to some extent, there is still a pre-budget forecast of a £38bn deficit for the full year.
The Conservatives have been going for Alastair Darling's head, overlooking the rule that a minister is most vulnerable when there is unrest on his own backbenches. Their attacks have simply solidified support for the Chancellor who was already popular among Labour MPs who thought that he took the right course of action in nationalising Northern Rock.