The UK government borrowed more than expected last month, with inflation pushing up interest payments on debt partly to blame. Borrowing, the difference between spending and tax income, reached £25.6bn in April, £11.9bn more than for the same month last year.
The costs of energy support schemes and increases in benefit payments were also behind the increase. The BBC News service is reporting that this was the second-highest borrowing figure for April since records began in 1993.
Chancellor Jeremy Hunt said it was “right we borrowed billions to protect families and businesses against the impacts of the pandemic and Putin’s energy crisis”.
“But debt and borrowing remain too high now – which is why it’s one of our priorities to get debt falling. We’ve taken difficult but necessary decisions to balance the nation’s books, and if we stick to our plan and get our economy growing, then debt is set to fall.”
The latest borrowing figures from the Office for National Statistics (ONS) come the day before the release of monthly inflation figures which are expected to show the rate falling below 10% for the first time since last July.
The ONS also revised down its estimate for last year’s borrowing to £137.1bn, a drop of £2.1bn.
The ONS said interest payments on central government debt hit £9.8bn in April. That was £3.1bn more than a year earlier, and was the highest April figure since monthly records began in 1997.
The increase largely reflects the increase in interest payable on UK bonds, which are financial products that the government sells to international investors to raise the money it needs. Many of these bonds are “index linked”, meaning the government’s repayments rise in line with the Retail Prices Index measure of inflation, which is currently at double-digit levels.
When the rate of inflation increases, the cost to the government of these interest payments also rises.
Capital Economics analyst Ruth Gregory said the figures showed the public finances had got the new fiscal year “off to a shaky start”.
“But we doubt this will prevent the chancellor from embarking on a fiscal splurge ahead of the next election. Given the recent resilience in the economy, weaker-than-expected receipts was a little surprising,” she said.
Ms Gregory noted the chancellor was already on track to overshoot the OBR’s full-year borrowing forecast of £132bn by about £3.2bn and doubted borrowing would fall much this year.
“While we wouldn’t be at all surprised to see a pre-election giveaway, we suspect much of what the chancellor gives away will probably be taken away once the election is over, regardless of whether the Conservatives or Labour are in power,” she added.