UK borrowing higher than expected in blow to Hunt

THE Government borrowed more than expected in February despite higher tax receipts, in a blow to the Chancellor as he seeks headroom for more tax cuts.

Public sector borrowing, excluding banks, reached £8.4bn last month, according to the Office for National Statistics, which was more than analyst predictions of £6bn.

However, it was still £3.4bn less than in February last year as more than a million self-employed workers were late to file their tax returns, meaning many of their payments showed up a month after the January deadline.

The Treasury has borrowed £106.8bn so far this financial year, which was £4.6bn less than in the same 11-month period a year ago, and the lowest amount for four years in cash terms.

But the level of high borrowing means the next Government will face financial pressure to reverse any tax cuts Jeremy Hunt announces before the election, according to Ruth Gregory at Capital Economics.

She said: “February’s disappointing public finances figures suggest that the OBR’S new 2023/24 borrowing forecast published in March’s Budget already looks too optimistic.

“But this may not prevent the Government from squeezing in another pre-election tax-cutting fiscal event later this year. But a fiscal tightening will probably still be required beyond 2024. So anything the Chancellor gives away will probably be taken away once the election is over.”

Tax receipts climbed sharply as the Chancellor raked in £906.2bn over the financial year so far, a rise of £50bn on the previous year.

Income tax, which has been boosted by a stealth freeze of thresholds at a time of rising nominal pay, raised an extra £22.5bn.

Corporation tax receipts climbed by £14.3bn following a rise in the rate last April from 19pc to 25pc.

VAT brought in an additional £9.5bn, with inflation pushing up prices and so increasing in more revenue through the tax charged at 20pc on sales.

National Insurance, which for employees is charged at a lower rate because of Jeremy Hunt’s 2p cut which came into force in January, raised an additional £1.4bn.

But spending increased far more quickly. So far this financial year the Government has spent more than £1 trillion, a rise of £69.1bn on the year.

This includes a £39.4bn rise in payments to the Bank of England’s quantitative easing scheme, which is losing money owing to higher interest rates and low bond prices.