UK borrows more as energy support begins and economy slows

Losses on government bonds and higher debt interest caused by rising inflation add to October figure

Government help with energy bills and the impact of a slowing economy helped push UK public borrowing last month to the fourth highest level for an October on record, official figures have shown.

The Office for National Statistics said the gap between the state’s spending and its revenues widened by £4.4bn to £13.5bn last month as payments began under the energy support scheme.

Higher debt interest caused by rising inflation and the first payments by the Treasury to indemnify the Bank of England for losses made on its buying and selling of government bonds also caused borrowing to be higher than a year ago.

The October total was well below the £21.5bn expected by City economists – partly because the figures did not include estimates of government support provided for business.

A breakdown of the ONS figures showed the energy bills support scheme – which provides a £400 discount off bills – cost the government £1.9bn in October, while the energy price guarantee, which caps the average household bill – cost £1.1bn.

Public borrowing was £84.4bn in the first seven months of the 2022-23 financial year – a £21.7bn drop on the same period of 2021-22 but £35.6bn higher than in the period to October 2019, immediately before the public finances were affected by the Covid-19 pandemic.

Ruth Gregory, a UK economist at Capital Economics, said there were “growing signs” that the weakness in economic activity was hitting the state’s finances. “Total tax receipts in October, at £70.2bn were £700m lower than last October’s level,” she said.

Jeremy Hunt, the chancellor of the exchequer, said: “It is right that the government increased borrowing to support millions of business and families throughout the pandemic, and the aftershocks of Putin’s illegal invasion of Ukraine.”

Hunt, who used last week’s autumn statement to raise taxes and reduce spending, added: “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.

“There is no easy path to balancing the nation’s books, but we have taken the necessary decisions to get debt falling while actively taking steps to protect jobs, public services and the most vulnerable.”


Larry Elliott Economics editor

The GuardianTramp

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