Domestic energy bill support raises government borrowing

PUBLIC borrowing rose in October as the Government started subsidising energy bills and covering losses incurred by the Bank of England’s massive bond buying programme.

The Office for National Statistics (ONS) said the Treasury borrowed £13.5bn in October to plug the gap between tax receipts and spending.

This is £4.4bn more than the previous year and the fourth highest October deficit since records began in 1993. However, this is less than the £19.1bn expected by economists.

Higher tax receipts helped to reduce the Government’s borrowing bill, with money from income tax and VAT rising by 8pc and 6pc respectively and overall tax receipts up 5pc to £51.7bn in October.

Jeremy Hunt, the Chancellor, announced a £55bn package of tax rises and spending cuts in the Autumn Statement that will see workers and businesses hand even more of their earnings to the taxman from next April. Tax receipts are up strongly this financial

year, with income tax, stamp duty, VAT and corporation tax all seeing doubledigits increases.

Debt interest payments jumped to £6.1bn in October, half of which reflected the jump in the retail prices index) measure of inflation, which rose 14.2pc last month compared with a year ago. Debt interest alone is expected to hit £120bn this financial year. The ONS said the borrowing figures accounted for £1.9bn in spending on energy bills, which reflected the first tranche of subsidies introduced by Rishi Sunak when he was Chancellor that will reduce all bills by £400 this winter. It also includes borrowing to help cap average household energy bills at an average of £2,500, but not help for businesses, which will be accounted for at a later date.

Mr Hunt said it was “right” to increase borrowing to support energy bills because of Vladimir Putin’s war in Ukraine. Borrowing is expected to hit £177bn this financial year as energy subsidies and debt interest increase.

Michal Stelmach, senior economist at KPMG UK, said: “The public finances continue to face a tug of war between demand for energy support and the overarching need to balance the books.”