STOCK London UK economy
Chancellor of the Exchequer Jeremy Hunt blamed Russia’s attack on Ukraine for the jump in the cost of energy. Image Credit: Bloomberg

London: UK government borrowing surged in November as the public finances came under mounting pressure from rising debt-interest payments and the huge cost of subsidizing energy bills for consumers and businesses.

The budget deficit stood at 22 billion pound - the highest monthly total in records stretching back to 1993 and almost triple the 8.1 billion pound reading a year ago, the Office for National Statistics said Wednesday. Economists had forecast a shortfall of 14.8 billion pound.

Until recently, borrowing had been on a downward trend as the recovery from the pandemic boosted tax receipts and reduced Covid-related spending. The improvement has now gone into reverse, however, with budget officials predicting 2022-23 as a whole will see the second-highest deficit in a decade.

Chancellor of the Exchequer Jeremy Hunt blamed Russia’s attack on Ukraine for the jump in the cost of energy.

“We have taken significant action to support millions of businesses and families here in the UK,” Hunt said in a statement. “We have a clear plan to help halve inflation next year, but that requires some tough decisions to put our public finances back on a sustainable footing.”

The rise in borrowing was driven by the massive surge in spending on household energy support and debt interest. The combined cost of all the energy support programs, including the price cap, was around 7 billion pound for the month of November alone.

The shortfall in the first eight months of the fiscal year climbed to 105 billion pound, the fourth highest on record. The Office for Budget Responsibility expects the total to reach 177 billion pound for the full 12 months. At more than 7.1 per cent of GDP, that would represent the biggest fiscal gap since 2012-13, leaving aside the pandemic when the deficit hit a peacetime high.

The deterioration reflects the toll being taken by sky-high energy prices and the worst bout of inflation in four decades. The damage to the public finances is forecast to persist, with government debt expected to spend the coming years above 100 per cent of GDP despite the 55 billion pound of tax rises and spending cuts announced Hunt last month.