Phone selloff brings government ?12bn surplus

Britain's public finances showed an impressive ?12bn surplus last month as the first receipts from the auction of mobile phone licences poured into the government's coffers, according to official figures published today.

The result is the biggest May surplus on record and compares with a ?6.6bn surplus in April and a ?1.7bn deficit in May 1999. The increase comes from the payment of ?12.4bn by the first three of the winning five bidders in the ?22.5bn selloff of third generation mobile phone licences.

However, the government's preferred measure of the underlying state of the public finances - public sector net borrowing - showed a deficit of ?2.2bn for May.

Today's figures are likely to fuel debate over the government's decision to use the surplus to pay off part of Britain's ?321.8bn national debt. In his Mansion House speech last week chancellor Gordon Brown reaffirmed his commitment to what he called his "golden rule" - that the current budget, which sets revenues against expenditure, should be balanced over the economic cycle.

This means that the government must manage spending in a way which reduces the ?2.2bn deficit without taking into account the income from the sale of the mobile licences.

The Treasury has announced that although it will receive payments for the mobile licences up front, it will treat the income as rent and account for it over 21 years.