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Energy bill support pushes UK budget deficit to February record
Global Banking & Finance Review®
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By Andy Bruce and Sachin Ravikumar
LONDON (Reuters) -Britain recorded the largest budget deficit for any February since at least 1993 when monthly records started, swelled by government spending on energy bill support programmes, official data showed on Tuesday.
The Office for National Statistics said public sector net borrowing, excluding state-owned banks, was 16.68 billion pounds ($20.43 billion) in February. The figures are not adjusted for inflation.
The reading was above all forecasts in a Reuters poll of economists that had pointed to public sector net borrowing, excluding state-owned banks, of 11.4 billion pounds.
The ONS said February’s borrowing data reflected “substantial” spending on energy bill support programmes.
The higher-than-expected borrowing underlines the dilemma facing finance minister Jeremy Hunt, who must fund expensive support for households and businesses in the near term while working out a way to cut taxes by the time of the next election, likely in 2024.
Hunt said last week the energy subsidies would be extended until June, but they are likely to cease thereafter.
Spending on energy support schemes totalled 9.3 billion pounds in February alone, the ONS said.
“Borrowing is still high because we’re determined to support households and businesses with rising prices and are spending about 1,500 pounds per household to pay just under half of people’s energy bills this winter,” Hunt said on Tuesday.
Published with his annual budget last week, forecasts from the Office for Budget Responsibility (OBR) showed an improved outlook for the public finances compared with its previous report in November, with borrowing averaging 10 billion pounds lower in each future financial year than previously predicted.
While the OBR said this reflected a less pessimistic economic outlook than four months ago, borrowing is still likely to run about 50 billion pounds higher each year compared against its March 2022 forecasts, before the full scale of the energy shock was apparent.
Tuesday’s data showed cumulative borrowing from April 2022 through February 2023 stood at 132.2 billion pounds. Last week the OBR forecast borrowing for 2022/23 as a whole would reach 152.4 billion pounds, or 6.1% of economic output.
“The OBR’s full-year forecast … is not in serious danger of being breached,” said economist Samuel Tombs from consultancy Pantheon Macroeconomics.
“We continue to think, however, that the OBR’s optimism about the medium-term economic outlook is misplaced and that the government will not stick to plans for a substantial fiscal consolidation over the coming years.”
Britain’s debt interest bill was 6.9 billion pounds in February, 1.3 billion pounds less than a year earlier, reflecting changes payments on inflation-linked government bonds, the ONS said.
($1 = 0.8163 pounds)
(Reporting by Sachin Ravikumar and Andy Bruce, Editing by Kylie MacLellan, Sarah Young and Christina Fincher)
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