UK Government Borrowing Surges Aim High Inflation

The UK’s public sector net borrowing rose to £25.6 billion last month, the second-highest April borrowing on record. It’s 14 percent higher than the Office for Budget Responsibility’s (OBR) estimate (£22.4 billion) and over 85 percent higher than borrowing in the same month last year (£13.7 billion). The figure is also the sixth highest since monthly records began in 1993, only eclipsed by some months during the COVID-19 pandemic. But the borrowing during financial year 2023/24 was less than the OBR forecast of £152.4 billion, standing at £137.1 billion. The Office for National Statistics (ONS) said additional spending in the energy support schemes, benefit payments, and costlier national debt interests contributed to the swelling in April’s borrowing. Public sector net worth was a deficit of £611.8 billion at the end of April 2023, and public sector net debt was £2.5 trillion, around 99.2 percent of gross domestic product (GDP). The debt–GDP ratio level was the highest since the early 1960s, ONS said. The price of servicing the debt also shot up in April. The interest payable on central government debt was £9.8 billion, around 46 percent higher than in April 2022, or the third highest in any month on record. The government’s energy support schemes, which pay for parts of the inflated energy bills for households and businesses and the increase in benefit payments also helped push the government borrowing. Former Prime Minister Liz Truss’s government last year introduced the energy support schemes after the COVID-19 lockdowns and Russia’s invasion of Ukraine triggered a global energy price hike. The government spent £3.9 billion on energy support payments in April, up £1.8 billion from a year ago. That figure is likely to recede sharply with falling energy costs, as well as an expected reduction in the regulated price cap for consumer energy bills. On top of higher spending, April’s budget deficit reflected weaker receipts collected by the government at £69.7 billion, down from £72.4 billion in April 2022. Ruth Gregory, an economist from consultancy Capital Economics, said that April’s public finances figures “got the new fiscal year off to a shaky start,” but they are unlikely to prevent the government from “embarking on a fiscal splurge ahead of the next election.” Chancellor of the Exchequer Jeremy Hunt defended the energy support schemes, but acknowledged that the debt has remained too high. “It is right we borrowed billions to protect families and businesses against the impacts of the pandemic and Putin’s energy crisis,” he said. “But debt and borrowing remain too high now—which is why it’s one of our priorities to get debt falling,” he added. “We’ve taken difficult but necessary decisions to balance the nation’s books, and if we stick to our plan and get our economy growing, then debt is set to fall.” Liberal Democrat Treasury spokeswoman Sarah Olney blamed Truss for her so-called mini-budget, which introduced the energy support package, saying the government should have put more taxes on corporations and big banks. “The British taxpayer is still feeling the hit from Liz Truss’s disastrous mini-budget,” she said. “It is frankly shocking that the government has still not put people first by putting a proper windfall tax in place and reversing its unfair tax cuts for the big banks.

UK Government Borrowing Surges Aim High Inflation

The UK’s public sector net borrowing rose to £25.6 billion last month, the second-highest April borrowing on record.

It’s 14 percent higher than the Office for Budget Responsibility’s (OBR) estimate (£22.4 billion) and over 85 percent higher than borrowing in the same month last year (£13.7 billion).

The figure is also the sixth highest since monthly records began in 1993, only eclipsed by some months during the COVID-19 pandemic.

But the borrowing during financial year 2023/24 was less than the OBR forecast of £152.4 billion, standing at £137.1 billion.

The Office for National Statistics (ONS) said additional spending in the energy support schemes, benefit payments, and costlier national debt interests contributed to the swelling in April’s borrowing.

Public sector net worth was a deficit of £611.8 billion at the end of April 2023, and public sector net debt was £2.5 trillion, around 99.2 percent of gross domestic product (GDP).

The debt–GDP ratio level was the highest since the early 1960s, ONS said.

The price of servicing the debt also shot up in April.

The interest payable on central government debt was £9.8 billion, around 46 percent higher than in April 2022, or the third highest in any month on record.

The government’s energy support schemes, which pay for parts of the inflated energy bills for households and businesses and the increase in benefit payments also helped push the government borrowing.

Former Prime Minister Liz Truss’s government last year introduced the energy support schemes after the COVID-19 lockdowns and Russia’s invasion of Ukraine triggered a global energy price hike.

The government spent £3.9 billion on energy support payments in April, up £1.8 billion from a year ago.

That figure is likely to recede sharply with falling energy costs, as well as an expected reduction in the regulated price cap for consumer energy bills.

On top of higher spending, April’s budget deficit reflected weaker receipts collected by the government at £69.7 billion, down from £72.4 billion in April 2022.

Ruth Gregory, an economist from consultancy Capital Economics, said that April’s public finances figures “got the new fiscal year off to a shaky start,” but they are unlikely to prevent the government from “embarking on a fiscal splurge ahead of the next election.”

Chancellor of the Exchequer Jeremy Hunt defended the energy support schemes, but acknowledged that the debt has remained too high.

“It is right we borrowed billions to protect families and businesses against the impacts of the pandemic and Putin’s energy crisis,” he said.

“But debt and borrowing remain too high now—which is why it’s one of our priorities to get debt falling,” he added.

“We’ve taken difficult but necessary decisions to balance the nation’s books, and if we stick to our plan and get our economy growing, then debt is set to fall.”

Liberal Democrat Treasury spokeswoman Sarah Olney blamed Truss for her so-called mini-budget, which introduced the energy support package, saying the government should have put more taxes on corporations and big banks.

“The British taxpayer is still feeling the hit from Liz Truss’s disastrous mini-budget,” she said. “It is frankly shocking that the government has still not put people first by putting a proper windfall tax in place and reversing its unfair tax cuts for the big banks.