UK borrows more than forecast as inflation fuels debt costs

UK government borrowing came in higher than forecast in the first four months of the fiscal year as soaring inflation drove up debt costs. 

A larger-than-forecast £4.9 billion (S$8.09 billion) budget deficit in July took the total for 2022-23 so far to £55 billion- £3 billion more than officials forecast in March. Debt-servicing costs surged by 81 per cent from a year earlier.

The figures raise fresh questions about the tax cuts being promised by the two candidates bidding to succeed Boris Johnson as prime minister. 

In a scathing assessment this week, the Institute for Fiscal Studies accused both Liz Truss and Rishi Sunak of being irresponsible by offering tax giveaways at a time when borrowing is already set to overshoot. 

The highest inflation in 40 years is pushing up debt payments because they are tied to price indexes. The Bank of England is predicting a lengthy recession, and pressure is growing for tens of billions pounds of extra support for households struggling with the cost of living. BLOOMBERG