UK public borrowing surges from energy support, inflation

AFP , Tuesday 22 Nov 2022

British state borrowing jumped last month on fallout from costly energy support and soaring inflation, official data showed Tuesday.

UK Jeremy Hunt
This handout photo shows Britain s Chancellor of the Exchequer Jeremy Hunt making an autumn budget statement in the House of Commons in London on November 17, 2022. AFP


Public sector net borrowing hit £13.5 billion ($16 billion) in October, up from £9.2 billion a year earlier, the Office for National Statistics said in a statement.

"October's high borrowing figure largely is a consequence of the government's decision to shield households from most of the surge in energy prices," said Pantheon Macro analyst Samuel Tombs.

The government of Prime Minister Rishi Sunak has maintained household energy support measures introduced by his predecessor Liz Truss to cushion a cost-of-living crisis, as prices rocketed after key producer Russia's invasion of Ukraine.

Decades-high inflation, fuelled largely by sky-high energy bills, also saw interest on debt repayments balloon last month.

"It is right that the government increased borrowing to support millions of businesses and families," finance minister Jeremy Hunt said in response to the data.

"But to tackle inflation and ensure the economic stability needed for long-term growth, it is vital that we put the public finances back on a more sustainable path."

In a budget last week, Hunt hiked taxes and slashed spending to reverse Truss's unfunded tax cuts that had sent the pound sliding and UK borrowing costs surging.

Recession forecasts

The government also stated last week that the UK economy had fallen into a recession and would shrink 1.4 percent next year.

The Organization for Economic Co-operation and Development was more positive, however, forecasting a contraction of 0.4 percent in 2023.

That would still be more than any of the world's seven most advanced nations next year, the OECD added in global forecasts given Tuesday.

The organisation meanwhile took aim at the UK government's support efforts to cap energy bills, saying it would continue to push up inflation.

"Better targeting of measures to cushion the impact of high energy prices would lower the budgetary cost, better preserve incentives to save energy, and reduce the pressure on demand at a time of high inflation."

The ONS added that total UK debt rose in October to almost £2.46 trillion or 97.5 percent of GDP.

This was driven by the ongoing impact of emergency pandemic spending, in tandem with falling tax receipts in the faltering economy.

Keir Starmer, leader of Britain's main opposition party Labour, told business leaders Tuesday that his party would "give Britain the clear economic leadership it needs" if elected in the next general election not due until 2024.

"We will inherit an economy that's been damaged by the last 12 weeks and the last 12 years, and we need to fundamentally accept that," he told the annual conference of the Confederation of British Industry.

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