Jeremy Hunt has been handed disappointing news from the public finances after government borrowing was higher than expected in February, leaving the national debt at the highest levels since the 1960s.
The Office for National Statistics said public sector net borrowing was £8.4bn in February, £3.4bn less than in the same month a year ago. However, it was higher than any economist expected in a Reuters poll that predicted a deficit of £6bn.
Jessica Barnaby, a senior statistician at the ONS, said: “This was the fourth consecutive month in which borrowing was lower than in the same month a year ago, with growth in tax receipts exceeding growth in spending. Relative to the size of our economy, debt remains at levels last seen in the early 1960s.”
With one month of the 2023-24 financial year remaining, the ONS said the budget deficit for the year so far stood at £106.8bn, down 4.1% compared with first 11 months of the same period a year earlier.
However, February’s unexpectedly high level of borrowing could put in danger forecasts made by the Office for Budget Responsibility alongside this month’s budget for a £114.1bn deficit for 2023-24 as a whole.
Ruth Gregory, chief UK economist at the consultancy Capital Economics, said the “disappointing” borrowing figures suggested the OBR forecast “already looks too optimistic”.
“But this may not prevent the government from squeezing in another pre-election tax-cutting fiscal event later this year,” she added.
“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.”
The latest figures showed growth in central government receipts, with a £6.3bn increase in revenue from income tax, corporation tax and VAT compared with the same month a year earlier.
Even after a 2p cut in national insurance announced by Hunt in last year’s autumn statement, which came into effect from January, the figures for February showed a rise in income from social security contributions of about £400m from the same month a year earlier.
However, the growth in tax income was outweighed by the impact of inflation on government spending.
Laura Trott, the chief secretary to the Treasury, said the economy was “turning a corner” with falling inflation and rising wages.
“It was right that this government provided billions pounds to support individuals and businesses during Covid, and pay half of people’s energy bills after Putin’s invasion of Ukraine. But we can’t leave future generations to pick up the tab,” she added.
