The United Kingdom's public finances outperformed expectations in December, providing a welcome boost for the Conservative government as the country looks towards elections later this year.
Public sector borrowing stood at £7.8 billion (€9.12 bn) in December – roughly half of what it was a year ago and significantly lower than the £14 bn (€16.37 bn) forecast by the Office for Budget Responsibility (OBR), according to figures released on Tuesday.
This level of borrowing is the lowest for a December since 2019, noted the Office for National Statistics (ONS). Cumulative borrowing since the start of the fiscal year in April was also lower than anticipated.
With national elections looming and the economic situation precarious (inflation rebounded slightly in December to 4%), these figures will offer Finance Minister Jeremy Hunt “more room for manoeuvre” for pre-election spending in March’s budget, said Ruth Gregory of Capital Economics.
Support tied to the pandemic and subsequent energy crisis following the war in Ukraine saw UK public borrowing soar. “It’s right that we repay these debts so that future generations aren’t left footing the bill,” Hunt said in a statement on Tuesday, asserting that the economy is now “turning a corner”.
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Despite December’s rebound, inflation has significantly dropped from its peak of around 11% at the end of 2022. This has notably reduced the interest paid by the UK government as some government bonds are indexed to a retail price index.
Government central debt interest amounted to £4bn (€4.68 bn) in December – £14.1bn (€16.48 bn) less than a year ago and also significantly less than forecasts, according to the statistics institute.
However, overall public sector debt remains high: at the end of December, it stood at £2,685.6 bn – approximately 97.7% of Gross Domestic Product (GDP) – maintaining levels not seen since the early 1960s.
