Pandemic bounce-back helps lift borrowing gloom for Sunak as tax revenues climb
Britain’s public purse is in better shape than expected after the bounce-back from the pandemic boosted Treasury’s coffers.
The Government borrowed £20.5billion last month – still the second-highest August on record, but £5.5billion less than the same time last year, according to the Office for National Statistics.
Receipts from income tax, national insurance, inheritance tax and stamp duty payments all climbed.
Relief: Economists think borrowing is set to come in around £25bn below the £233.9bn predicted, providing some breathing room for Chancellor Rishi Sunak (pictured)
Economists now think that Government borrowing is set to come in around £25billion below the £233.9billion predicted by the Office for Budget Responsibility (OBR) for this year, providing some breathing room for Chancellor Rishi Sunak as he tries to prune the UK’s £2.2trillion debt pile.
But he still has a job on his hands, as the Treasury had to borrow more than economists had predicted in August to cover rising interest on the national debt.
The debt pile is 97.6 per cent of the size of the UK economy, the highest level since 1963. And interest payments shot up to £6.3billion last month, a rise of 84 per cent on the same time a year ago, largely due to soaring inflation.
While borrowing for the full year is still likely to undershoot the OBR’s cautious estimates, August’s £20.5billion sum was much higher than the £15.6billion which economists had predicted and will set off alarm bells.
Danni Hewson, an analyst at AJ Bell, said: ‘Although the numbers are going the right way, borrowing figures overshot expectations.
Interest payments on all that debt shot up, and September will be even more painful when you factor in the latest retail price inflation figures.
And the medicine for inflation – a rate rise from the Bank of England which is widely accepted to be on its way – will perversely add to debt costs.’
The Chancellor is expected to set out new rules to rein in borrowing. He said: ‘We are determined to get our public finances back on track – that’s why we have set out the focused and responsible steps we are taking to keep debt under control.’
Higher tax receipts, up £84.7billion between April and August compared to the same time last year to £280.4billion, will help.