UK Has Lower-Than-Forecast Borrowing Despite Energy Support

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(Bloomberg) — UK government borrowing grew less than forecast in October despite the first transfer to the Bank of England to cover losses in the quantitative easing program and the first support payments to help with household energy bills.

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The £13.5 billion ($16 billion) deficit last month was £4.4 billion more than a year earlier, official figures published Tuesday show, but below the £21.5 billion economists were expecting. The September borrowing number was revised down as well.

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It left borrowing in the first seven months of the fiscal year at £84.4 billion, £21.7 billion less than last year. At the autumn statement last week, the Office for Budget Responsibility forecast borrowing to reach £177 billion for 2022-23 as a whole. 

October saw the first payments to help households with energy bills, of around £3 billion. Indemnities for losses in the QE program cost 800 million. 

Interest payments were little changed at £6.1 billion but bigger figures are expected as soaring inflation pushes up the cost of servicing index-linked debt. The OBR estimates that the interest payable for the current financial year will reach £120.4 billion, more than the entire annual education budget.

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Chancellor of the Exchequer, Jeremy Hunt said: “It is right that the government increased borrowing to support millions of business and families throughout the pandemic, and the aftershocks of Putin’s illegal invasion of Ukraine.

“But to tackle inflation and ensure the economic stability needed for long-term growth, it is vital that we put the public finances back on a more sustainable path.

“There is no easy path to balancing the nation’s books, but we have taken the necessary decisions to get debt falling while actively taking steps to protect jobs, public services and the most vulnerable.”

—With assistance from Liza Tetley.