High inflation helps to swell UK budget deficit in April
LONDON – Britain posted a larger-than-expected budget deficit in April as high inflation pushed the government’s debt interest bill for the month to a new record, official data showed on Tuesday.
Public sector net borrowing, excluding state-owned banks, rose in April to 25.56 billion pounds ($32.26 billion) – almost 12 billion pounds more than in April 2022, the Office for National Statistics said.
A Reuters poll of economists had pointed to public sector net borrowing, excluding state-owned banks, of 19.75 billion pounds.
In April, Britain added 9.8 billion pounds to its debt interest bill – the highest total for the month since comparable records started in 1993, reflecting interest payable on inflation-linked government bonds.
Britain’s rate of consumer price inflation was the highest in Western Europe in March, remaining above 10 percent. Data on Wednesday are expected to a show a drop in April to around 8.2 percent, according to the Reuters poll consensus.
The government spent 3.9 billion pounds on energy support payments in April, up 1.8 billion pounds from a year ago.
On top of higher spending, April’s budget deficit reflected weaker receipts collected by the government at 69.7 billion pounds, down from 72.4 billion pounds in April 2022.
The ONS revised down its estimate for the budget deficit in the 2022/23 financial year that ended in March to 137.1 billion pounds, from 139.2 billion pounds previously.
In March, the Office for Budget Responsibility (OBR) forecast that borrowing in 2022/23 would settle at 152.4 billion pounds, 15.3 billion pounds more than the ONS estimate.
For the current 2023/24 financial year, the OBR’s forecast of 131.6 billion pounds still looked about right, said economist Samuel Tombs from consultancy Pantheon Macroeconomics.
“We doubt, however, that public borrowing will fall to the low levels in the medium term predicted by the OBR last month. The OBR is too upbeat about the economy’s medium-term economic outlook,” Tombs said.
($1 = 0.7923 pounds)