UK’s lower-than-expected borrowing points to future budget leeway
Hunt faces pressure from lawmakers in his Party to cut taxes before the election
London: Britain’s government borrowed less than predicted in the financial year that ended in March, according to data on Tuesday which showed finance minister Jeremy Hunt may be able to adopt a less austere stance ahead of the next general election.
The Office for National Statistics (ONS) reported borrowing of 139.2 billion pounds ($174 billion) for the fiscal year to the end of March, or 5.5 per cent of gross domestic product - up from 121.1 billion pounds in 2021/22, or 5.2 pound of GDP.
The Office for Budget Responsibility - whose forecasts are used by the government - estimated last month that borrowing for the 2022/23 financial year would be 152.4 billion pounds, or 6.1 per cent of economic output.
Overall the figures chimed with other readings of Britain’s economy that point to a better-than-expected performance in recent months, even if the overall picture remains one of stagnant activity and high inflation.
Hunt faces pressure from lawmakers in his Conservative Party to cut taxes before an election expected in 2024, while public sector workers’ unions are pushing for pay increases to offset the impact of inflation’s surge above 10 per cent.
“The big picture is that we remain reasonably convinced that ... Hunt will be able to announce a package of tax cuts ahead of a likely general election next year, even if the underlying growth trend this year remains subdued,” said Philip Shaw, chief economist at Investec.
In March alone, the government borrowed 21.5 billions pounds, just over the 20 billion pounds consensus in a Reuters poll.
A new assessment of the value of student loans was a big factor behind a cut in estimated borrowing of 14.6 billion pounds over the 11 months to February, the ONS said.
The government’s total energy bill subsidies cost about 8 billion pounds in March, taking the six-month total cost to 41.2 billion pounds.
Public sector net debt for 2022/23 stood at 2.53 trillion pounds or 99.6 per cent of economic output - a proportion last seen in the early 1960s.
A new estimate of the public sector’s net worth - the difference between liabilities and assets - showed a deficit of 606 billion pounds, up from 530 billion pounds last year.
“A growing net worth deficit shows that we are failing to invest in our future, and we need to turn this record around urgently,” said Cara Pacitti, senior economist at the Resolution Foundation think tank.