The federal government says its budgetary surplus shrank to $600 million in January as personal income tax reductions and the GST cut ate into revenues for the month.

The finance department says revenues dropped $900 million, or 3.9%, in the month.

For the first 10 months of the fiscal year that ends Monday, the accumulated surplus was $10 billion, down $600 million from the corresponding period last year.

Meanwhile, program expenses were up $10.8 billion, or 7.2%, for the period, due to higher transfer payments to provinces and individuals.