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UK public borrowing surges as energy bill support takes effect

borrowing  British Chancellor of the Exchequer Jeremy Hunt talks to a television crew outside the BBC headquarters in London, Britain November 18, 2022. REUTERS/Henry Nicholls
Chancellor Jeremy Hunt has warned that 'there is no easy path to balancing the nation’s books' as borrowing increased. Photo: Henry Nicholls/Reuters

Public borrowing jumped in October as the government started subsidising energy bills and soaring inflation which drove up interest payments.

Borrowing – the difference between government spending and tax income – was £13.5bn last month, the Office for National Statistics (ONS) said.

The figure was £4.4bn higher than last year and was the fourth highest figure for October on record. Still, the figure was below the £21bn predicted by analysts.

The jump in borrowing, which takes total public sector net borrowing to £84.4bn in the seven months between April and October, was largely driven by the government’s energy support schemes for households and businesses which came on stream last month.

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The ONS estimated that the Government spent on £3bn energy support schemes, including £1.9bn for the £400 home energy discount payments.

Government measures including the energy bills support scheme, the energy price guarantee and the energy bill relief scheme, came into effect last month to help businesses and consumers with soaring energy costs.

Chancellor Jeremy Hunt 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.

“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.”

It’s the fourth highest October borrowing since monthly records began in 1993.

Meanwhile, public sector receipts – money gained from the public sector, largely through taxes – were £77.6bn for the month.

“The public finances continue to face a tug of war between demand for energy support and the overarching need to balance the books,” Michal Stelmach, senior economist at KPMG UK, said.

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“As things stand, the headroom against meeting the new fiscal targets is hanging by a thread, and we expect that they could easily be missed thanks to a less favourable economic outlook compared to the OBR’s forecast,” he added.

The government's independent forecaster, the Office for Budget Responsibility (OBR), has predicted that the public sector would borrow £177bn this year, which would be the second highest figure since 1994.

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