UK public sector borrowing almost tripled in November after government measures to protect households and businesses from a spike in energy prices and higher interest payments on debt.
Public sector net borrowing reached 22 billion pounds last month, almost three times the 8.1 billion pounds reached in the same month last year and the highest November borrowing since monthly records began in 1993, according to data released from the Office for National Statistics on Wednesday.
The figure was also much higher than the £13 billion forecast by economists polled by Reuters. Loans had been on a downward trend for more than a year until the autumn, having benefited from the reopening of the economy and the end of government support for Covid-19, but are now rising again.
Divya Sridhar, economist at consultancy PwC, said the latest UK public finance figures “reflect the fiscal implications of continued support for energy bills and higher inflation”.
Current public sector spending reached £82bn, up £13.5bn on the same month last year, as the Household Energy Price Guarantee and Business Energy Bill Support Scheme came into effect in October, added £6.1bn to borrowings in November.
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Like the UK, most countries in Europe have adopted fiscal measures to help consumers and businesses cope with the spike in energy costs that followed Russia’s full-scale invasion of Ukraine in February.
Interest on government debt also boosted UK borrowing as it cost £7.3bn in November, up £2.4bn on the same month last year and the highest November figure since the start of monthly records in April 1997. This was largely a result of higher inflation, with interest payable on index-linked habits rising in line with the retail price index.
Chancellor Jeremy Hunt said: “We have a clear plan to help halve inflation next year, but this requires some tough decisions to put our public finances back on a sustainable footing.”
Aid payments also rose to £13.2bn in November, £3.3bn more than the same month last year, largely due to an increase in cost-of-living payments.
Borrowing rose despite tax receipts rising by £2.2bn in a year to £51.6bn in November, thanks to a robust labor market.
Public sector borrowing in the financial year to November was revised down to £105.4bn and remained lower than the same period last year, reflecting reduced spending and higher tax receipts in the previous month.
It was also lower than the £113.2 billion forecast for the same period by the Office for Budget Responsibility, the UK’s fiscal watchdog, according to their monthly figures released on Wednesday.
Last month, the OBR said it expected public sector borrowing to rise to £177bn in the fiscal year ending in March, up from the £99bn forecast in March 2022, when the impact of higher energy prices is still not taken into account.
“The trio of government support for energy prices, cost-of-living payments and pressure from a weakening economy means borrowing will total £175bn in 2022/23, a whopping £50bn above the total for 2021/ 22,” said Ashley Webb, an economist at Capital Economics.
“Looking ahead, continued support for energy bills and the ninth consecutive interest rate hike announced by the Bank of England last week will continue to weigh on public finances,” Sridhar said.
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