New figures reveal that government borrowing in August exceeded economists’ expectations, the difference between government spending and tax income surging to £11.6bn according to data provided by the Office for National Statistics (ONS). This marks an increase of £3.5bn from the same period a year prior and stands as the fourth highest August borrowing since monthly records were first kept in 1993.
Previous estimates had indicated that public borrowing would reach about £11.1bn for the month. Despite the higher-than-expected borrowing, the number was still below the £13bn projection set by the government’s finance watchdog, the Office for Budget Responsibility (OBR), in March.
It is a common practice for governing bodies to borrow funds to stimulate the economy and finance large projects like railways and new roads, in the hope that such infrastructural enhancements will spur economic growth and job creation. Speculations are abundant that the government may reveal new spending commitments in the forthcoming Autumn Statement, targeting issues such as the financial health of local councils and the safety of school buildings.
Borrowing until now for the ongoing financial year has reached £69.6bn, as revealed by ONS data. This is an increment of £19.3bn from the same five-month frame the previous year. Nonetheless, the total is £11.4bn less than the amount projected by the OBR.
Despite the amounting borrowings, analysts are questioning the financial room Chancellor Jeremy Hunt has at his disposal for substantial spending commitments or tax cuts during the forthcoming fiscal event in November.
Responding to the latest data, Mr. Hunt commented, “These numbers illustrate the necessity to balance the books after aiding families during the pandemic. It becomes expeditiously efficient when we have inflation under control due to the subsequent check on interest rates, hence sticking to the plan of downfalling it.”
Recent unexpected drops in the inflation rate have sparked debates around the probability of the Bank of England initiating another interest rate surge in its recent meeting.
As of August, reports from the ONS demonstrate that the interest payable on government debt was £5.6bn, a decrease by £3.1bn compared to a year ago. Approximately £1.9bn of that reduction was mainly due to a 0.3% surge in the Retail Prices Index measure of inflation from May to June.
By August end, the total net debt had escalated to £2.59 trillion, denoting 98.8% of the UK’s gross domestic product (GDP)—the total valuation of all goods and services fabricated in the UK annually.
