UK public sector borrowing soars more than expected

UK public sector borrowing more than doubled in December, driven up by higher debt interest payments and the government’s measures to help households and businesses with soaring energy prices.

Public sector net borrowing hit £27.4bn last month, up from a revised £10.7bn in the same month in 2021 and the highest December borrowing since monthly records began in 1993, according to data published by the Office for National Statistics on Tuesday.

The figure was much higher than the £17.7bn forecast by economists polled by Reuters and well above the £17.6bn forecast in November by the Office for Budget Responsibility, the UK fiscal watchdog.

Public borrowing rose “largely because of a sharp rise in spending on energy support schemes and an increase in debt interest,” said the ONS.

Higher interest on government debt cost £17.3bn last month, the highest December figure since monthly records began in April 1997.

“Right now we are helping millions of families with the cost of living, but we must also ensure that our level of debt is fair for future generations,” said chancellor Jeremy Hunt.

The cost of servicing government debt has risen sharply since mid-2021 largely as a result of higher inflation, with the interest payable on index-linked gilts rising in line with the retail prices index.

Spending rose on the government’s policies to help households and businesses deal with high energy prices, including the energy bills support scheme.

Public sector borrowing in the financial year to December was £128.1bn, £5.1bn more than that borrowed in the same period last year, but £2.7bn less than forecast by the OBR.