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Soaring inflation boosts UK debt to 14 billion in May | government borrowing

Soaring inflation boosts UK debt to 14 billion in May |  government borrowing

 


Government borrowing was higher than expected at $14 billion in May as interest payments on UK debt broke monthly records due to soaring inflation.

According to the National Bureau of Statistics (ONS), debt and interest payments rose 70 percent from a year ago to $7.6 billion, the central government’s third-highest debt and interest payments in a month and a record high in May.

Some economists say government debt this year will rise by $20 billion more than the Office of the Treasury’s Independent Budget Office (OBR) projected in its last estimate in March, driven by rising borrowing and a slowing economy in the UK.

“As the economy weakens and interest rates rise, public finances this year will be worse than the OBR projections,” said Paul Dales, UK chief economist at consulting firm Capital Economics.

Samuel Tombs, chief British economist at Pantheon Macroeconomics, said an additional $14 billion in government spending to protect low-income families and pensioners from inflation would hit public finances in the second half of the fiscal year. said. So, public borrowing this year will be around $130 billion, significantly exceeding the projected OBR of $99 billion, he said.

Rishi Sunak said he was cautious about allowing the UK’s spending deficit to grow over the next few years due to rising debt interest.

The Prime Minister plans to cut the government’s annual spending deficit more severely than many European countries over the next four years to limit the increase in the UK’s debt-to-GDP level to 90%.

He said: Rising inflation and rising debt interest costs are just as problematic for public finances as household budgets. That’s why we use our fiscal firepower to use a balanced approach to provide targeted support for the cost of living while keeping us on track to reduce debt.

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Although borrowings were down 4 billion from May of last year, it was the third highest in May since monthly records began in 1993 and 8.5 billion more than in May 2019, before the pandemic.

ONS said the surge in UK debt interest payments was attributable to the recent surge in the Retail Price Index (RPI) measure of inflation.

By the end of the fiscal year, debt and interest payments were $14.1 billion, an increase of $4.7 billion compared to the same period last year, ONS said.

The Bank of England’s target consumer price inflation index hit a 40-year high of 9.1% in May.

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2/ https://www.theguardian.com/business/2022/jun/23/uk-borrowed-14bn-may-inflation-interest-debt

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