UK's Sunak faces new headache as borrowing figures overshoot forecast

BRITISH government borrowing in the recently ended 2021/22 financial year was almost 20 per cent higher than forecast by the country’s budget office last month, showed figures published on Tuesday (Apr 26).

The data underscored the challenge for British finance minister Rishi Sunak who is under pressure to give new help to households and businesses hit by surging inflation, but who says he wants to fix the public finances after his Covid-19 borrowing surge.

Sunak responded to the figures by saying he was committed to helping people face their immediate cost of living pressures but repeated his plan to tackle Britain’s debt stockpile which has jumped to more than £2 trillion (S$3.49 trillion).

“Public debt is at the highest levels since the 1960s and rising inflation is pushing up our debt interest costs, which mean we must manage public finances sustainably to avoid saddling future generations with further debt,” he said.

British public-sector net borrowing, excluding state-owned banks, totalled £151.8 billion in the 2021/22 financial year,

Last month, the Office for Budget Responsibility (OBR) said it expected borrowing in 2021/22 to be £127.8 billion.

The government’s debt office said it was increasing its borrowing plans for the 2022/23 year by almost £14 billion to just under £162 billion.

In March alone, borrowing was £18.1 billion, the Office for National Statistics (ONS) said on Tuesday, below the average forecast of a deficit of £19.25 billion in a Reuters poll of economists.

An ONS official said the 2021/22 overshoot was largely due to higher public spending on goods and services and investment — both of which were likely to be revised in future — while receipts were largely in line with the OBR’s forecasts.

The deficit for the 12 months to March was less than half its level in the previous financial year when Britain borrowed the most it ever has in peacetime to fund its huge support for the economy during the worst of the Covid-19 pandemic.

Nonetheless, the most recent figure was still the third-highest on record since records began in 1947, after the first year of the coronavirus pandemic and the 2009/10 financial year, during the global financial crisis.

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.

Debt interest payments of almost £70 billion in the 2021/22 year were up by nearly 80 per cent from a year earlier.

Public-sector net debt, excluding state-owned banks, totalled £2.34 trillion or 96.2 per cent of gross domestic product (GDP), the ONS said. REUTERS