LONDON (Reuters) – British public borrowing with just one month left in the current financial year was less than half its level from a year earlier, official data showed on Tuesday, putting finance minister Rishi Sunak in a fairly comfortable spot as he prepares new forecasts.
Borrowing for the first 11 months of the 2021/2022 financial year was 138.4 billion pounds, 52% below the record 290.9 billion pounds from April 2020 to February 2021, when the public finances bore the brunt of the COVID-19 pandemic.
Borrowing in February alone came in much higher than expected at 13.1 billion pounds – more than 5 billion pounds above economists’ average forecast in a Reuters poll – although this overshoot was largely cancelled out by a 4.2 billion pound upward revision to January’s budget surplus.
Sunak is due to publish updated growth and borrowing forecasts in a half-yearly fiscal statement on Wednesday, and was keen to emphasise what he sees as relatively limited scope to cushion the impact of a surging cost of living.
“The ongoing uncertainty caused by global shocks means it’s more important than ever to take a responsible approach to the public finances,” he said after the Office for National Statistics published Tuesday’s data.
Borrowing for 2021/22 is on course to come in below the 183 billion pounds or 7.9% of gross domestic product forecast by the government’s Office for Budget Responsibility in October, largely thanks to stronger-than-expected tax revenue.
Borrowing in 2020/21 reached 14.8% of GDP, its highest since World War Two. Sunak will have more cash than he expected a few months ago to soften the impact of a surge in energy costs and other prices that looks set to lead to the biggest squeeze on household incomes in at least 30 years.
But most economists expect him to offer relatively limited support now to hard-pressed households, in order to reduce government borrowing further after its COVID-19 surge and allow tax cuts nearer to a national election due by 2024.
Sunak also highlighted how fast-rising inflation is pushing up the cost of servicing Britain’s government debt, around a quarter of which pays an interest rate tied to the rate of retail price inflation.
“With inflation and interest rates still on the rise, it’s crucial that we don’t allow debt to spiral and burden future generations with further debt,” he said.
Debt interest payments of 8.2 billion pounds in February were 52% higher than in 2021, the ONS said.
Public-sector net debt, excluding state-owned banks, totalled 2.327 trillion pounds or 94.7% of GDP, the ONS said.
($1 = 0.7621 pounds) (This story has been refiled to correct year in headline to 2021/22)
(Reporting by David Milliken and Andy Bruce)
