The UK authorities borrowed £11.8bn final month, nearly twice as a lot as unbiased forecasters had anticipated, as excessive inflation pushed curiosity funds to an August document.
The figures from the Office for National Statistics present a tough backdrop for the chancellor, Kwasi Kwarteng, earlier than his mini-budget this Friday to handle the price of dwelling disaster.
Authorities borrowing was £2.6bn lower than in August 2021 however £6.5bn greater than the identical month in 2019 earlier than the coronavirus pandemic.
The £11.8bn determine was nearly double the £6bn predicted in March by the Workplace for Finances Accountability (OBR), the Treasury’s unbiased forecaster, primarily due to a rise in authorities spending. It was additionally greater than the £8.8bn forecast by Metropolis economists.
The federal government spent extra on debt curiosity in addition to social advantages due to the cost of price of dwelling grants to low-income households.
Debt curiosity payable by the central authorities rose to £8.2bn final month, the best determine for August since information started in 1997, due to the impact of excessive inflation, as measured by the retail costs index, on UK authorities bonds.
Talking earlier than an anticipated announcement of an vitality assist package deal for companies on Wednesday morning, Kwarteng stated: “Our precedence is to develop the economic system and enhance dwelling requirements for everybody – with robust financial progress and sustainable public funds going hand in hand.
“As chancellor, I’ve pledged to get debt down within the medium time period. Nonetheless, within the face of a significant financial shock, it’s completely proper that the federal government takes motion now to assist households and companies, simply as we did through the pandemic.”
The enterprise secretary, Jacob Rees-Mogg, is predicted to announce a cap on vitality costs for companies that might minimize the charges they pay by as much as half this winter. The brand new prime minister, Liz Truss, has already introduced that households’ vitality payments shall be capped for the following two winters at £2,500 for the common house, after costs soared, because of Russia’s struggle in Ukraine.
The federal government’s tax take elevated final month, pushing its receipts to nearly £70bn, up £5.6bn in contrast with August final 12 months however barely under the OBR’s forecast.
Samuel Tombs, the chief UK economist at Pantheon Macroeconomics, stated complete borrowing this 12 months “shall be far greater, as a result of new authorities’s fiscal activism. Admittedly, the loans to vitality suppliers to facilitate the value freeze at £2,500 for the common family most likely will enhance debt however not borrowing, as they are going to be thought-about a monetary transaction, involving the state buying an asset.”
The federal government is predicted to set out its measures to assist households on Friday in its mini-budget. Tombs added: “The true uncertainty surrounds whether or not the federal government will try to chop spending in an effort to part-fund these tax cuts, however with departments’ expenditure coming underneath strain from rising wages and vitality prices, the scope for effectivity financial savings is modest.”