UK public sector borrowing nearly tripled in November following government measures to shield households and businesses from soaring energy prices and higher debt interest payments.
Public sector net borrowing hit £22bn last month, nearly three times the £8.1bn reached in the same month last year and the highest November borrowing since monthly records began in 1993, according to data published by the Office for National Statistics on Wednesday.
The figure was also much larger than the £13bn forecast by economists polled by Reuters. Borrowing was on a downward trend for more than a year until the fall, having benefited from the reopening of the economy and the end of government Covid-19 support, but it is now rising again.
Divya Sridhar, economist at the consultancy PwC, said the latest data on the UK’s public finances “reflects the fiscal implications of continued energy bills support and higher inflation”.
Public sector current expenditure hit £82bn, £13.5bn more than in the same month last year, as the Energy Price Guarantee for households and the Energy Bill Support Scheme for businesses which took effect in October added £6.1bn to borrowing in November.
Like the UK, most countries in Europe have adopted fiscal measures to help consumers and businesses deal with the surge in energy costs that followed Russia’s full-scale invasion of Ukraine in February.
Interest on government debt also boosted UK borrowing as it cost £7.3bn in November, £2.4bn more than in the same month last year and the highest November figure since monthly records began in April 1997. This is largely the result of higher inflation, with the interest payable on index-linked gilts rising in line with the retail price index.
Chancellor Jeremy Hunt said: “We have a clear plan to help half inflation next year, but that requires some tough decisions to put our public finances back on a sustainable footing.”
Assistance payments also rose to £13.2bn in November, £3.3bn more than in the same month last year, mostly due to the increase in cost-of-living payments.
Borrowing increased despite tax receipts rising by £2.2bn in a year to £51.6bn in November, thanks to a solid labor market.
Public sector borrowing in the financial year to November was revised down to £105.4bn and remained lower than in the same period last year, reflecting reduced spending and higher tax receipts in the previous month.
This was also lower than the £113.2bn forecast for the same period by the Office for Budget Responsibility, the UK’s fiscal watchdog, according to their monthly figures published on Wednsday.
Last month, the OBR said it expected public sector borrowing would soar to £177bn in the fiscal year ending in March, up from £99bn forecast in March 2022 when the impact of the higher energy prices was not yet taken into account.
“The trio of the government’s energy price support, cost of living payments and pressures from the weakening economy implies that borrowing will come in at £175bn in 2022/23, a huge £50bn above the 2021/22 total,” said Ashley Webb, economist at Capital Economics.
“Looking ahead, continued energy bills support and the ninth consecutive rise in interest rates announced by the Bank of England last week will continue to squeeze public finances,” said Sridhar.