Breaking News
0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

UK public borrowing falls less than expected as debt costs rise

EconomySep 21, 2021 04:36AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
© Reuters. FILE PHOTO: A person reads a book outside the Bank of England in London, Britain, September 13, 2021. REUTERS/Hannah McKay

By David Milliken and Andy Bruce

LONDON (Reuters) -British public borrowing declined by less than expected in August, government figures showed on Tuesday, highlighting the hefty ongoing costs of the COVID-19 pandemic and a rise in debt interest payments as inflation picked up.

Public sector net borrowing, excluding state-controlled banks, fell to 20.5 billion pounds ($28.0 billion) in August, down 21% from August a year earlier, but well above economists' average 15.6 billion pound forecast in a Reuters poll.

British government borrowing soared last financial year because of heavy spending due to COVID-19, hitting its highest since World War Two at 15.5% of gross domestic product, up from an earlier estimate of 14.2%.

The ONS said this upward revision reflected higher estimates for the cost of a COVID-19 loan guarantee scheme and public-sector pensions.

Finance minister Rishi Sunak will unveil new budget and growth forecasts on Oct. 27, as well as new multi-year spending limits for individual government departments and potentially some longer-term fiscal goals.

Spending has fallen sharply during the current financial year, due in large part to a big drop in the number of people receiving job furlough payments and similar support for the self-employed.

Borrowing for the first five months of the 2021/22 financial year totalled 93.8 billion pounds, down by almost half on the same period a year earlier.

A big drop in furlough payments - which stop this month - and similar reduction in support for the self-employed was the biggest cause of the fall in spending.

But higher interest payments on inflation-linked government bonds had pushed up debt servicing costs in August and were likely to increase as inflation rose further in months to come, said Samuel Tombs, economist at Pantheon Macroeconomics.

Debt costs last month added up to 6.3 billion pounds, twice their level a year ago. Measured as a share of GDP, debt interest costs still remain low by historic standards.

Public debt as a share of gross domestic product rose to 2.023 trillion pounds or 97.6% of GDP in August, the highest ratio since March 1963.

RISING TAXES

Earlier this month the government announced it would increase the rate of payroll taxes paid by both employers and employees by 1.25 percentage points each, to fund greater health spending and long-term social care costs.

"We are determined to get our public finances back on track - that's why we have set out the focused and responsible steps we are taking to keep debt under control," Sunak said on Tuesday.

Analysts see Britain's tax burden rising to a record high for peacetime when the tax rises take effect.

Last week the Financial Times reported that Sunak would set out a target of ending borrowing for day-to-day spending within three years, and also aim to ensure that a measure of underlying public debt started falling by the 2024/25 tax year.

"We expect a fiscally-neutral package of measures in next month's Budget, with any small windfall from modestly upgraded GDP forecasts earmarked for a possible relaxation of the fiscal squeeze in the run-up to the next general election, which is due to be held in May 2024," Pantheon's Tombs said.

Britain's finance ministry said no decisions had been taken, beyond Sunak's pre-existing goal of putting the public finances on a more sustainable footing.

($1 = 0.7317 pounds)

UK public borrowing falls less than expected as debt costs rise
 

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 Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
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?
 
Post
 
Replace the attached chart with a new chart ?
1000
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 Investing.com'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
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email