Ishi Sunak faced another economic headache today as soaring inflation and slowing growth forced him to borrow more than expected in May.
Latest figures from the Office for National Statistics (ONS) showed the Chancellor hit the debt markets for a higher than expected £14billion during the month to spin the state wheels.
ONS data shows interest payments jumped 70% from a year ago to £8.6billion, a record for the month as the government was forced to increase its payments on indexed gilts.
The borrowing figure was the third highest on record for May, behind only the Covid-ravaged years of 2000 and 2021. Compared to 2019, it was £8.5bn higher.
But City analysts said today’s figures indicated a worrying deterioration in public finances that could hamper the Chancellor’s ambitions to cut taxes or provide more help to vulnerable households in the cost of housing crisis. life.
Paul Dales, chief UK economist at Capital Economics, said: “The bigger than expected rise in government borrowing in May is a blow to the government as it is set to lose two by-elections.
“Additionally, the combination of further weakening in economic activity and further interest rate hikes will likely mean borrowing exceeds the OBR forecast for 2022/23 by at least £99bn. minus £10billion This will limit the Chancellor’s ability to cut taxes and/or provide more subsidies to households when the cost of living crisis worsens later this year.
“Borrowing is still down from a year ago, but is now down more slowly than the OBR forecast in the March spring statement. The April figure has been revised up by £18.6bn to £21.9bn and borrowing of £14.0bn in May was worse than the OBR forecast of £10.3bn and the consensus forecast of £13.2 billion.
The Chancellor said: “Rising inflation and rising debt interest costs pose a challenge for public finances, as well as for family budgets. That’s why we’re taking a balanced approach — using our fiscal firepower to provide targeted aid with the cost of living, while staying on track to reduce debt.
“Being responsible with public finances now will mean that future generations will not be burdened with even higher debt repayments, and we can secure our economy in the long term.”
ONS data showed central government revenue was £66.6billion in May 2022, up £5.7billion from May 2021, when tax revenue was £48 £3.3 billion, an annual increase of £3.4 billion.
Central government current expenditure was £74.0bn, £2.2bn less than in May 2021, the additional £3.1bn cost of paying interest from the debt being offset by a £4.9 billion reduction in grants.