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Public sector borrowing surged to a record £16.7bn last month due to costs of the UK government’s energy support scheme, official figures show.
According to the Office for National Statistics (ONS), public sector net borrowing was £16.7bn in February, £9.7bn more than the same month last year and the highest borrowing since monthly records began in 1993. I was.
The ONS said the rise was largely due to £9.3bn of spending on energy support schemes.
The government’s energy assistance program, which was implemented last October to help homes and businesses cope with soaring gas and electricity bills following Russia’s invasion of Ukraine, has now reached around £34bn. increase.
In last spring’s budget, Treasury Secretary Jeremy Hunt announced that the energy price guarantee, capped at £2,500 bills per year, would be extended for three months from April to June.
inflation
ONS data showed central government debt interest was £6.9bn in February, down £1.3bn from a year ago.
Of the £6.9bn debt interest, £3.4bn reflects the impact of retail price index (RPI) inflation on index-linked gold leaf stocks.
Inflation has receded from the painful highs seen in October last year, but CPI inflation is still at 10.1%, with an RPI of 13.4%.
In the financial year to February 2023, the public sector borrowed £132.2bn, £15.5bn more than in the same period last year and the third highest financial year to February since monthly records began in 1993 was the amount borrowed.
At the end of February, net public sector debt was £2,507.3bn, or about 99.2% of GDP, reaching levels last seen in the early 1960s.
Regarding the latest data, the Prime Minister said:
“Lower inflation will drive these costs down, so halving inflation is one of our top priorities this year, alongside economic growth and debt reduction.”
Borrowing forecast
The amount was announced after the UK’s financial watchdog, the Office for Budget Responsibility (OBR), lowered its borrowing forecast for the current financial year to £152.4 billion from £177 billion.
The OBR said last week that new measures in the Spring Budget (such as increased childcare commitments for working parents) would boost spending, but borrowings are set to fall by an average of £10bn each year from next year onwards.
February figures left the government with £20.2bn of borrowing space in March, according to the ONS.
Pantheon Macroeconomics’ Samuel Tombs said OBR’s latest forecast is “not in serious danger of being broken.”
However, he said, “However, we continue to believe that OBR’s optimism about the medium-term economic outlook is misplaced and that the government will not stick to plans for substantial fiscal consolidation in the coming years.”
Investec Economics economist Philip Shaw said OBR’s latest borrowing projections are “easily achievable despite the cost of various energy support schemes and high interest payments.”
“Furthermore, a new treatment for student loan accounting could be introduced next month, which will reduce the deficit by another £8.6bn this year,” he said.
He added: Energy support measures are not repeated.
“The main political question is whether the deficit will be eliminated sufficiently to allow the prime minister to pay some taxes ahead of the next election. increase.”
tax burden
In the spring budget, Hunt resisted calls from Tory lawmakers, including former Prime Minister Boris Johnson, to repeal the April corporate tax hike.
He confirmed that the main corporate tax rate will be raised from 19% to 25% in April, returning to levels seen in the early 2010s.
Corporate tax revenue is projected to reach the equivalent of 3.7% of GDP by 2027/28. This is the highest level since the tax was introduced by Treasury Secretary Jim Callahan in 1965.
This move means that the overall tax burden will continue to rise, reaching a post-war high in four years’ time.
The UK tax burden is expected to reach 37.7% of GDP in 2027-2028, according to OBR. This is the highest since World War II and 4.7 percentage points above pre-COVID-19 pandemic levels.
PA Media contributed to this report.
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