Breaking News
Get Actionable Insights with InvestingPro+: Start 7 Day FREE Trial Register here
Investing Pro 0
Ad-Free Version. Upgrade your experience. Save up to 40% More details

Surging UK inflation erodes room for budget manoeuvres

Economic IndicatorsJan 25, 2022 04:11AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
© Reuters. FILE PHOTO: City workers cross the Millennium footbridge in the financial district of London, Britain January 7, 2016. REUTERS/Toby Melville

By Andy Bruce and William Schomberg

LONDON (Reuters) -Britain's government looks firmly on track to borrow less this tax year than forecast but surging inflation will soon curb any leeway for finance minister Rishi Sunak who is under pressure to ease a cost-of-living squeeze.

Borrowing for the 2021/22 financial year so far - April to December - is so far running almost 13 billion pounds below the forecasts used by Sunak in his budget planning at 146.8 billion pounds, official date showed.

While on the face of it that presents Sunak with room for manoeuvre ahead of his March 23 budget update, the figures also showed rising costs from a surge in inflation.

Debt interest payments hit 8.1 billion pounds last month - the second highest on record and reflecting a jump in retail price inflation, the peg for inflation-linked British government bonds which account for about a third of the total.

"Surging inflation is making (Sunak's) task of returning the public finances to a sustainable footing much more difficult," Samuel Tombs, an economist with Pantheon Macroeconomics, said.

Retail price inflation hit a 30-year high of 7.5% in December, according to data published by the Office for National Statistics (ONS) last week.

The Resolution Foundation think tank said Sunak should use the leeway he has now to address the growing strain on household budgets from surging energy bills.

In response to Tuesday's data, Sunak stressed the importance of bringing down the deficit as interest costs rise.

"Risks to the public finances, including from inflation, make it even more important that we avoid burdening future generations with high debt repayments," he said.

Sunak is under pressure, including from some lawmakers in his own Conservative Party, to drop a planned increase in social security contributions for workers and employers - known as National Insurance - which is due to start in April.

The opposition Labour Party has pointed to mismanagement of government spending during the pandemic.

Public sector net borrowing, excluding state banks, totalled 16.848 billion pounds ($22.71 billion) in December alone, the ONS said, less than the average forecast of 18.5 billion pounds in a Reuters poll of economists.

Borrowing figures for the 2021/22 financial year so far included a 6 billion-pound downward revision to borrowing up until November, the ONS said.

The data showed a strong recovery in tax receipts.

Corporate tax revenues hit a all-time high of 5.5 billion pounds in December, the ONS said - with the caveats that it reflected large companies paying tax bills on a quarterly basis, and that the record is in current prices.

($1 = 0.7420 pounds)

Surging UK inflation erodes room for budget manoeuvres

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at’s discretion.

Write your thoughts here
Are you sure you want to delete this chart?
Post also to:
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Are you sure you want to delete this chart?
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
Sign up with Email