News from the Financial Associated Press on January 24 (Editor Bian Chun)The UK government is in a deeper debt woes. Rising interest on debt and spending to insulate consumers and businesses from energy price shocks have weighed on Britain’s public finances.
The Office for National Statistics said on Tuesday that the fiscal deficit was 27.4 billion pounds ($34 billion) in December, the largest on record for the same month and almost three times the 10.7 billion in the same period last year, well above the 173 billion that economists had expected. billion pounds.
The figures underscore the risks to the UK economy. Prime Minister Rishi Sunak is struggling to contain inflation near four-decade highs and strikes that are crippling public services. A possible recession this year is expected to further widen the deficit.
Ruth Gregory, senior U.K. economist at Capital Economics, said in a note to clients that today’s weaker-than-expected public finances data will only put the chancellor’s hand on the public finances. That means he will “wait until closer to the next general election, perhaps 2024, before announcing any major tax cuts.
The deteriorating fiscal position dashed hopes that government debt was falling. The UK deficit stood at £128.1bn in the first nine months of the 2022-23 financial year, up £5bn on the same period last year, and officials expect the deficit to rise by billions of pounds in the final three months of the year.
A double-digit rise in VAT and income tax revenues has partly offset a £33.4bn surge in debt interest costs in the first nine months of the 2022-23 financial year. Total British tax revenue rose 11 percent to 658 billion pounds in the financial year to December, boosted by high inflation and a strong labor market.
Public sector debt is £2.2 trillion, or about 88% of GDP. The deficit was driven by debt interest costs of £17.3bn, the second-highest monthly figure on record.
About a quarter of UK government bonds are tied to the retail price index (RPI), which reflects inflation, which has soared to its highest level in decades. Nearly £14bn of this was paid directly into inflation-indexed debt.
Adding to the deficit is the subsidized cost of gas and electricity, which hit £7bn in December alone.
Chancellor of the Exchequer Jeremy Hunt said in a statement: “We are helping millions of families to reduce the cost of living, but we must also ensure that our debt levels are fair for future generations. To reduce debt, we have Some tough decisions were made and it was critical to stick to the plan.”