Danni Hewson, head of financial analysis at AJ Bell, examines the mixed picture emerging from the latest UK borrowing figures, with progress made over the past year overshadowed by a more difficult start to the new tax year.
Danni Hewson, AJ Bell head of financial analysis, comments on the latest UK borrowing figures:
“There’s good news and bad news for the chancellor in this latest set of public sector borrowing figures.
“If you look back over the year that was, she has been delivering on her commitment to bring down borrowing. There was a 15% decrease compared to the previous year as wage increases and frozen thresholds dragged people into higher tax brackets and changes to employer NI padded out government receipts. Borrowing as a percentage of GDP fell to the lowest level since the pandemic, before three lockdowns and an energy price shock caused by Russia’s invasion of Ukraine.
“But as the calendar flipped over to a new tax year, things look decidedly less rosy for Rachel Reeves. Despite a £2.4 billion increase in cash coming in, that boon has been obliterated by the cost of the triple lock uprating to the state pension and the highest level of debt interest on record for the month.
“A single month’s data must be treated with caution. But with borrowing costs spiking thanks to domestic political turmoil and the impact of rising oil prices caused by the conflict in the Middle East, there is a huge amount of uncertainty about the level of borrowing which may be required in the coming months.
“The chancellor has been criticised for not being bold enough with her plans to help households deal with the coming challenges of a second cost of living crisis, but it seems she will have little wiggle room if interest rates climb higher and early growth fizzles out.”
