UK borrowing remains “eye-watering” despite beating forecast

GOVERNMENT support for household and business energy bills swelled Britain’s budget deficit for the 2022/23 financial year to its fourth-highest on record, but it was still smaller than official forecasters predicted, data showed on Tuesday (Apr 25).

The Office for National Statistics (ONS) reported borrowing of £139.2 billion (S$231.8 billion) for the fiscal year that ended in March, or 5.5 per cent of gross domestic product (GDP) – up from £121.1 billion in 2021/22, or 5.2 per cent of GDP.

Last month, the Office for Budget Responsibility (OBR) – whose forecasts are used by the government – said borrowing for the last financial year would be £152.4 billion, or 6.1 per cent of economic output, before dropping to 5.1 per cent in 2023/24.

Overall the figures chimed with other readings of Britain’s economy that point to a slightly better-than-expected performance in recent months, even if the overall picture remains one of largely stagnant activity and high inflation.

In response to the data, Finance Minister Jeremy Hunt said Britain had borrowed “eye-watering” sums to support the economy through the Covid-19 pandemic and the energy price shock stemming from Russia’s invasion of Ukraine.

Hunt is under pressure from lawmakers in his Conservative Party to cut taxes before an election expected in 2024 while public sector worker unions are pushing for higher pay increases to offset the impact of inflation’s surge above 10 per cent.

A new assessment of the value of student loans was a big factor behind a cut in estimated borrowing of £14.6 billion over the 11 months to February, the ONS said.

An ONS official said the government’s total energy bill subsidies cost about £8 billion in March, taking the six-month total cost to £41.2 billion.

In March alone, the government borrowed £21.5 billion in March, slightly more than the £20 billion consensus in a Reuters poll of economists.

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Samuel Tombs, an economist at consultancy Pantheon Macroeconomics, said the better-than-expected fiscal performance would likely carry over into the current financial year as the economy now looks likely to grow rather than contract in 2023.

“We doubt, however, that public borrowing will fall to the low levels in the medium term predicted by the OBR last month. The OBR is excessively upbeat about the economy’s medium-term economic outlook,” Tombs said.

The ONS said the full-year estimate for 2022/23 borrowing did not represent final data and would be revised. REUTERS