By Michael Race
Business reporter, BBC News
Government borrowing in November hit its highest level for the month since records began, official figures show.
Borrowing – the difference between spending and tax income – stood at £22bn as the public sector spent more than it received.
Government spending on energy bill support for households and cost-of-living payments helped fuel the rise.
And the interest on government debt in November rose to £7.3bn, the highest figure since 1997.
“Since mid-2021, the cost of servicing central government debt has increased considerably,” the Office for National Statistics (ONS) said.
November’s borrowing figure was £13.9bn more than in November last year, which is the highest level for the month since records began in 1993.
Grant Fitzner, chief economist at the ONS, said rising inflation was the biggest reason for the record government borrowing figures for November.
“That’s reflected in a couple of things,” he told the BBC’s Today programme. “Firstly, of course, as we know the cost of energy support for households and business, that’s around £6.5bn extra spending a month.
“[It’s also due to] higher debt interest payments, reflecting again, high inflation and interest rate payments and also higher pensions and benefits than a year ago.”
UK inflation, the rate at which prices rise, eased to 10.7% in the year to November, but the cost of living is still rising at its fastest pace in 40 years.
The government’s decision to embark on much higher spending in the autumn as it subsidises energy bills is a big part of the explanation for the highest official borrowing figure in November since 1993.
But keep in mind it’s a November figure – and is by no means the highest borrowing in a month. It’s less than half what Rishi Sunak borrowed in March and April 2020 to support businesses and firms through lockdown in the onset of the pandemic.
When you look at the less volatile figures for the financial year to date, the amount the government was officially deemed to have to borrow in the eight months to November was £105.4bn – £7bn less than in the same period of 2021.
A big part of the reason borrowing came down was a surge in receipts from income tax and national insurance – up by £31.5bn to £251.4bn. As the accountancy firm Quilter & Co points out this morning, with tax thresholds frozen, this is likely to become a growing source of revenue for the chancellor as pay rises and millions are dragged over both the basic rate threshold and the one above for which you pay 40% income tax.
Consumer prices have been rising this year as energy, fuel and food costs soar due to the war in Ukraine and Covid. Food prices are up 16.5%.
But the recent easing of inflation has led some analysts to predict that a turning point may have been reached.
Commenting on the latest borrowing figures, Chancellor Jeremy Hunt blamed the “twin global emergencies of a pandemic and Putin’s war in Ukraine” for driving up the government’s costs.
“We have a clear plan to help halve inflation next year, but that requires some tough decisions to put our public finances back on a sustainable footing,” he added.
The ONS said the government spent £1.9bn in November on the Energy Bills Support Scheme, which provides a £400 non-repayable discount to households in England, Scotland and Wales.
Meanwhile, the Energy Price Guarantee, which limits typical households’ bills to £2,500 per year, helped drive a £4.7bn year-on-year rise in government spending on subsidies.
Total public sector spending struck £98.9bn in November, while day-to-day government expenditure increased by £13.5bn on the year to £82bn for November, the ONS said.
The increases were due to more cash being spent on helping households and businesses with the cost of living, but also because of higher interest rates, with the amount of interest on debt up 50.1% on the year.
However, receipts in November were estimated to have been £69.2bn, a £3.2bn rise on the same month last year. Of the receipts, tax income increased by £2.2bn to £51.6 billion last month.
Samuel Tombs, chief UK economist at Pantheon Economics, said that full-year public borrowing looked on course to hit the Office for Budget Responsibility’s (OBR) forecast for 2022-23, but risked overshooting in future years.
“We think the OBR is wrong to assume that households will reduce their saving rate substantially, given the likely impact of higher interest rates and rising unemployment on their saving behaviour,” he added.