UK national debt soars to record £2.6tn

THE Government borrowed nearly five times as much in July as it did for the same month last year, official figures are expected to show on Tuesday.

The City believes the Office for National Statistics will say the Government borrowed £5.6billion from bond market investors last month, compared to £1.14bn in July last year.

That may push the national debt to a new record of £2.6trillion. In June, the national debt as a percentage of gross domestic product exceeded 100 per cent for the first time since March 1961, meaning Britain’s debts are greater than the size of its economy.

Despite the forecast increase in official borrowing, Capital Economics deputy chief UK economist Ruth Gregory said the UK’S public sector finances are likely to be in better shape than the official budget watchdog, the Office for Budget Responsibility (OBR) predicted.

She pointed out while the Government borrowed £54.4million for the first three months of the 2023/24 financial year, £12.2bn above the same period last year, it is £7.5bn below the OBR’S forecasts.

That is due to the unexpected resilience of the economy, which she said means “PAYE income tax, NICS and VAT receipts will again surprise the OBR on the upside”.

The Bank of England has hiked its base rate 14 times in an effort to tame soaring inflation. Capital Economics estimates that this could add £18bn to public borrowing in 2027/28 above the OBR’S forecast, which would limit the ability of Chancellor Jeremy Hunt to cut taxes before the next election.