The government borrowed almost £17bn to balance its books last month – the fourth-highest December total on record – as the public finances felt the impact of sharply rising inflation.
Rising tax receipts were partly offset by a surge in interest payments on the £2tn national debt, swelled by the emergency measures to support the economy over the past two years.
Prompting a warning from the chancellor of the need to reduce government borrowing, debt interest payments rose to a six-month high of £8.1bn after the sharp rise in inflation. Repayments on some of the UK’s borrowing is linked to the cost of living.
Despite the arrival of the Omicron variant, la Oficina de Estadísticas Nacionales said the UK’s budget deficit was £7.6bn lower at £16.8bn than in the same month a year earlier and came in below the £18.5bn expected by the City. Tax receipts in December rose by £6.2bn compared with a year earlier, including a rise in corporation tax, stamp duty, income tax, VAT and fuel duty receipts.
Borrowing in the first nine months of the 2021-2 financial year stood at £146.8bn – down on the previous year but still the second highest on record.
Analysts said the UK was on course to hit the £183bn borrowing forecast made by the independent Office for Budget Responsibility but might be blown off course next year by soaring debt payments.
Rishi Sunak dijo: “We are supporting the British people as we recover from the pandemic through our plan for jobs and business grants, loans and tax reliefs.
“Risks to the public finances, including from inflation, make it even more important that we avoid burdening future generations with high debt repayments.
“Our fiscal rules mean we will reduce our debt burden while continuing to invest in the future of the UK.”
Bethany Beckett, a UK economist at Capital Ciencias económicas, dicho: “As it stands, cumulative borrowing in 2021-22 is still on track to hit the OBR’s forecast of £183bn. But we doubt that this will last: we expect RPI inflation to average 2.8 percentage points higher than the OBR’s forecast in 2022-23, which will push up total borrowing in 2022-23 to £105bn, well above the OBR’s forecast of £83bn.”
Tumbas de Samuel, the chief UK analyst at Pantheon Macro, said that despite rising debt payments, Sunak still had scope to intervene to ease the cost of living crisis that would affect households from April.