Government borrowing hits record high

Public sector borrowing more than doubled in November, official data showed on Wednesday, fuelled by government intervention on soaring energy bills and cost of living payments.

According to the Office for National Statistics, public sector net borrowing excluding banks (PSNB ex) was a record £22.0bn last month, well above both November 2021's £8.1bn and consensus expectations of £13bn.

It was also the highest November borrowing since monthly records began in 1993.

Fuelling the increase was a jump in UK public sector total expenditure and higher interest payments. Central government debt interest payable rose £2.4bn year-on-year to £7.3bn, the highest November figure since April 1997, while central government day-to-day spending jumped £13.5bn to £82bn. Public sector total expenditure was £98.9bn.

The Energy Price Guarantee and Energy Bills Support Scheme, introduced to help shield households and businesses from soaring gas and electricity bills, both took effect in October. Social assistance payments, meanwhile, jumped £3.3bn to £13.2bn, because of cost of living grants.

In contrast, National Insurance receipts rose by only 1.3%, compared to a 16.6% growth rate recorded in the prior seven months of the fiscal year, after April’s increase was reversed.

The Office for Budget Responsibility expects public sector borrowing to reach £177bn in the year to March 2023.

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said that forecast was "within reach". But he added: "We continue to expect public borrowing to overshoot the OBR’s forecast in future years. Granted, we think the Bank Rate will peak at 4% next year, and expect the Monetary Policy Committee to reduce it gradually to 2% between 2024 and early 2026.

"Nonetheless, 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.

"We anticipate a discretionary loosening of fiscal policy equal to about £22bn - 1% of GDP - by 2026/27. Accordingly, we think public borrowing eventually will settle at about 4% of GDP in the mid-20202, above the 3% ceiling specified by the new fiscal rules."