UK increases borrowing as energy support starts and economy declines

The UK has reportedly increased its borrowings as government assistance with energy costs and the effects of a weak economy led to an increase in the UK public debt last month to the fourth highest level for an October on record.

Office for National Statistics reported that the difference between the state's spending and its income grew by $5.2 billion (£4.4 billion) to $16 billion (£13.5 billion) as payments under the energy support plan started last month.

As per sources, borrowing increased from a year earlier due to both rising inflation-related debt interest rates and the Treasury's initial payments to compensate the Bank of England for losses incurred from its purchases and sales of government bonds.

The October total was significantly below the $25.5 billion (£21.5 billion) projected by City analysts, partly as projections of government support for companies were not included in the data.

The government spent $2.2 billion (£1.9 billion) in October on the energy bills support program, which offers a $475 (£400) discount on bills, and $1.3 billion (£1.1 billion) on the energy costs guarantee, which sets a maximum on the average household bill.

During the initial seven months of the 2022–23 fiscal year, state borrowing was $100 billion (£84.4 billion), down $25.7 billion (£21.7 billion) from the same time in 2021–22 but $42.3 billion (£35.6 billion) more than in the time up to October 2019, just before the Covid–9 outbreak had an impact on the public economy.

Ruth Gregory, a UK economist at Capital Economics stated that there are increasing signals that the state's finances are being impacted by the economy's decline. With a total of $83.3 billion (£70.2 billion), October's tax revenues were $831 million (£700 million), less than they were in October of the previous year.

According to Jeremy Hunt, chancellor of the exchequer, the government should have expanded borrowing to help millions of businesses and families during the outbreak and the fallout from Putin's illegal invasion of Ukraine.

Source credit: https://www.theguardian.com/business/2022/nov/22/uk-borrows-energy-support-economy-inflation