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UK borrowing for 2021/22 revised down by 7 billion pounds
Global Banking & Finance Review®
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By David Milliken
LONDON (Reuters) -British public borrowing for the last financial year was revised down by more than 7 billion pounds on Tuesday, giving the government some extra leeway as it considers how much more relief to provide in the cost of living crisis.
Finance minister Rishi Sunak is under growing political pressure to do more to help those hardest hit by a surge in inflation to its highest in 40 years – possibly funded by a windfall tax on energy companies’ bumper profits.
“The downward revisions to borrowing in 2021/22 will only add to the pressure on the chancellor to go big when finalising the imminent support package for households,” said Paul Dales, chief UK economist at Capital Economics.
So far Sunak has offered a 22 billion pound package of support – worth about 350 pounds to most households – in the face of energy prices which regulators increased by 54% in April and are forecast to rise by around 40% more in October.
Anti-poverty campaigners say recent tax increases enacted by Sunak cancel out most of this support for many households.
Britain borrowed the highest amount since World War Two during the 2020/21 financial year at 317 billion pounds or 14.8% of gross domestic product, as the COVID-19 pandemic pummelled the economy.
Borrowing in the 2021/22 financial year fell to 144.6 billion pounds or 6.1% of GDP, figures from Britain’s Office for National Statistics showed on Tuesday. This was below an initial ONS estimate last month of 151.8 billion pounds though above earlier government forecasts of 127.8 billion.
Stronger revenue from income tax, value-added tax and national insurance all boosted the public finances compared with initial estimates, the ONS said.
In March, Britain’s Office for Budget Responsibility forecast borrowing during the current financial year would drop further to 99.1 billion pounds or 3.9% of GDP.
Borrowing excluding public sector banks in April, the first month of the new financial year was 23% lower than a year earlier at 18.6 billion pounds, Tuesday’s figures showed, in line with economists’ median forecast in a Reuters poll.
Higher tax revenue from April’s increase to national insurance charges, plus lower than expected debt interest payments, were two factors behind the fall, Dales said.
Sunak, in a statement after the data, highlighted how debt interest payments for the current financial year were forecast to soar to 83 billion pounds due to the jump in inflation.
“We must take a balanced and responsible approach to support people now, while also not burdening future generations,” he said.
Total public debt, excluding public-sector banks, was 2.348 trillion pounds or 95.7% of GDP, down from 96.0% in March.
($1 = 0.7951 pounds)
(Reporting by David Milliken and Andy Bruce, Editing by Kylie MacLellan and Raissa Kasolowsky)
Inflation is the rate at which the general level of prices for goods and services rises, eroding purchasing power. Central banks attempt to limit inflation to keep the economy running smoothly.
A windfall tax is a higher tax rate imposed on companies that have unexpectedly high profits, often due to favorable market conditions. It is used to redistribute wealth or fund public services.
National Insurance is a system of taxes paid by workers and employers in the UK to fund state benefits, including pensions and unemployment benefits. It is a key part of the social security system.
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