Help on energy bills pushes UK borrowing to a 30-year high
Woman in blanket – stock shot
Government borrowing hit a new high in December, driven by the cost of supporting households with their utility bills and rising debt interest costs.
Borrowing, the difference between spending and tax receipts, was £27.4 billion, the highest for December since records began in 1993.
Government bond yields reached £17.3 billion, more than doubling in a year.
The Office for National Statistics (ONS) said that inflation was the main reason for the increase in loans.
As gas prices begin to fall, the typical UK energy bill is still almost double what it was before Russia invaded Ukraine.
To ease the burden, the Government has reduced energy bills in England, Scotland and Wales by £400 this winter.
It also introduced the Energy Price Guarantee scheme, which caps average household bills at £2,500 a year.
Inflation, the rate at which prices are rising, is at its highest level in 40 years, putting pressure on millions of families.
Grant Fitzner, chief economist at the ONS, told the BBC that the cost of supporting energy bills increased borrowing by around £7 billion in December.
Meanwhile, interest rates on UK government bonds, or bonds the government sells to international investors to raise the money they need, have risen sharply, he said. This is mainly because many gilts are “index linked”, meaning repayments increase in line with inflation.
Mr. Fitzner told the Illum program: “If you had eliminated those two factors, the underlying public sector borrowing would have been lower than it was a year ago.”
He said government borrowing is likely to decrease once energy support programs are no longer needed and inflation – which is believed to have peaked – is finally coming down.
But Ruth Gregory, senior UK economist at Capital Economics, said the borrowing figures “provided further evidence that the government’s fiscal position is deteriorating rapidly”.
She said that borrowing is well above economists’ expectations, interest payments are at “huge” levels, government spending is high and there are “pressures from the flagging economy “.
Chancellor Jeremy Hunt said he will have to make cuts in public spending to get public finances back on track.
He also had to roll back many unfunded tax cuts promised by his predecessor, Liz Truss, after her plans caused panic in financial markets.
Referring to the latest borrowing numbers, Mr Hunt said the government was “helping millions of families with the cost of living, but we also need to make sure our debt is fair across generations future”.
He added that the government “has already taken some difficult decisions to reduce the debt” as it seeks to halve inflation and boost economic growth.