UK public sector borrowing fell more than expected last month and was lower than previously estimated for the latest fiscal year, giving chancellor Rishi Sunak more scope to address the cost of living crisis.
Public sector net borrowing was £18.6bn in April, well below the £24.2bn recorded in the same month last year, data from the Office for National Statistics showed on Tuesday.
April’s figure was lower than the £19.1bn forecast by the Office for Budget Responsibility, the UK fiscal watchdog.
In the fiscal year to March, the public sector borrowed £144.6bn, which was £7.2bn lower than earlier estimates from the ONS. This was less than half the borrowing in the previous year, as the economy bounced back from the pandemic.
Borrowing fell in April compared with last year because tax receipts increased as the economy grew, and spending fell as government pandemic support schemes for households and businesses were wound down. The cost of Covid vaccines and the NHS Test and Trace programme fell to its lowest level since August 2021 as free testing was phased out.
Public finances were boosted also by the large rises in personal taxation in April, with national insurance contribution rates rising and most tax allowances and thresholds frozen in cash terms.
As a result, central government receipts were £70.2bn in April, £9.9bn more than in the same month last year. At the same time, central government spending was £76.0bn, which was £6.7bn less than in the same month last year.
However many economists expect the boost to public finances to be soon outweighed by surging inflation, which could push the economy into a recession.
Michal Stelmach, senior economist at KPMG UK, said the “good fortune for the Exchequer is likely to run its course in the coming months as the economic outlook worsens and the cost of living crisis intensifies”.
The government is expected to unveil extra support for households as they face the highest inflation rate in 40 years.
Following the release of the borrowing data on Tuesday morning, Sunak said: “We must take a balanced and responsible approach to support people now, while also not burdening future generations, and we’re on track to drive public debt down by 2024-25.”
With opinion polls suggesting that the Conservatives would win only 33 per cent of the vote if a general election was held today, “the pressure is mounting on Mr Sunak to do more to improve his party’s chances of being re-elected in May 2024,” said Samuel Tombs, economist at Pantheon Macroeconomics.
As a result, Tombs expects the chancellor to bring forward the inflation-linked rise in the value of benefits from April 2023 to October and to greatly increase the value of the Warm Homes Discount this winter.
Despite the improvement from the two years of the pandemic, borrowing in the latest full fiscal year was the third-highest borrowing since records began in the fiscal year ending March 1947.
The UK public debt, or borrowing accumulated over time, was around 95.7 per cent of gross domestic product, a level not seen since the early 1960s.
Source: Economy - ft.com
