Thursday, May 16

Chancellor blames ‘eye-watering sums’ spent on pandemic and vitality payments assist for hike in public sector borrowing

The chancellor has blamed the “eye-watering sums” spent on serving to folks by means of the coronavirus pandemic and vitality disaster for a rise in public sector borrowing.

Public sector internet borrowing was £21.5bn final month – the second-highest March borrowing since month-to-month data started in 1993.

This implies that the general public sector spent greater than it obtained in taxes and different revenue, requiring it to borrow the shortfall.

The quantity additionally capped off the fourth-highest borrowing for a monetary yr since data started – £139.2bn, or 5.5% of GDP.

Chancellor Jeremy Hunt blamed the COVID-19 pandemic and the rise in vitality costs, which was worsened by Russia’s invasion of Ukraine.

He mentioned: “These numbers reflect the inevitable consequences of borrowing eye-watering sums to help families and businesses through a pandemic and Putin’s energy crisis.

“We have been proper to take action as a result of we now have managed to maintain unemployment at a near-record low and supplied the typical household greater than £3,000 in value of residing assist this yr and final.

“We stepped up to support the British economy in the face of two global shocks, but we cannot borrow forever. We now have a clear plan to get debt falling which will reduce the financial pressure we pass onto our children and grandchildren.”

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The £21.5bn borrowed in March was £14.5bn greater than the quantity borrowed in March 2020, in the beginning of the pandemic.

Choppy waters forward for the general public funds

Michal Stelmach, senior economist at KPMG UK, mentioned public sector internet borrowing over the yr was £18bn larger than within the earlier yr, however lower than half of the borrowing seen on the peak of the pandemic.

This distinction displays “a relatively smaller package of measures to tackle the energy crisis”, Mr Stelmach mentioned.

“Year-to-date outturn has been revised down substantially following the ONS correction to student loans arrangements, which reduces the proportion of student loan spending recorded as government investment,” he added.

“This brings the full-year borrowing figure £13.2bn below the OBR’s latest forecast, which already accounted for the impact of that change.

“Following a rollercoaster of financial shocks, public sector internet debt reached 99.6% of GDP, its highest degree since 1960-61.

“While the UK is not unique in facing pressures on the public finances, with recent shocks being largely global in nature, we estimate that around a quarter of the increase in gilt yields over the past year could be attributed to UK-specific factors.”

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