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Government borrowing overshoots forecasts in March as interest payments jump by 50%

·2-min read
Chancellor Rishi Sunak (HM Treasury)
Chancellor Rishi Sunak (HM Treasury)

Government borrowing more than halved last year as Covid-19 support schemes and health investments wound down, but interest payments on the UK’s debt pile are rising fast.

Figures from the Office for National Statistics show the government borrowed £151.8 billion in the 12 months to March 2022, down from £317.6 billion the prior year.

But interest payments on government debt soared, more than doubling from £30.5 billion to £69.9 billion last year.

Danni Hewson, a financial analyst at stockbroker AJ Bell, said it was “a real glass half full moment for the UK economy.”

National debt stands at £2.3 trillion, or 96.2% of GDP. Around £500 billion of UK debt pays interested linked to the retail price index, which stands at 9%. Experts think it could breach 10% this year.

Borrowing remains elevated and interest costs keep rising. The Treasury needed more than expected to plug shortfalls in the state budget in March, the ONS said.

The state borrowed £18.1 billion last month, which was up from £13.1 billion in February and higher than City forecasts of £15 billion.

It was the second biggest sum ever borrowed by the government in March, stretching back to 1993 when monthly records began.

March’s borrowing figure was £8.8 billion less than what the government borrowed in the same month a year earlier, when Covid-19 support schemes were still in operation, but £11.9 billion above pre-pandemic levels.

Monthly UK government borrowing (ONS)
Monthly UK government borrowing (ONS)

Higher than expected borrowing followed a jump in interest payments on UK national debt. Interest payments rose by 52.8% to £2.9 billion last month as soaring inflation pushed up costs.

Chancellor Rishi Sunak said: “Public debt is at the highest levels since the 1960s and rising inflation is pushing up our debt interest costs, which mean we must manage public finances sustainably to avoid saddling future generations with further debt.”

“Despite global economic headwinds, we continue to meet our fiscal rules, showing our commitment to keeping the public finances sustainable while supporting the UK’s long-term growth and addressing the immediate pressures facing people with their cost of living.”

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