Energy bills support drives public borrowing to record February high

“Substantial” government spending on energy bills support has sent public borrowing to an all-time February record, according to official figures.

The Office for National Statistics (ONS) said the £16.7bn budget deficit was the highest for the month since records began in 1993.

The total is up £9.7bn on February 2022 and greater than the £11.7bn that had been predicted by most economists in a Reuters poll.

ONS officials said the rise was “largely because of substantial spending on energy support schemes”, contributing £9.3bn to the total.

It comes after Chancellor Jeremy Hunt announced in the budget last week that the Energy Price Guarantee (EPG), which limits typical household bills to £2,500, would be extended for another three months, from April to June.

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Mr Hunt said borrowing was “still high” because his government was “determined to support households and businesses with rising prices”.

“What will bring these costs right down is lower inflation, which is why it remains one of our top priorities to halve it this year, alongside growing our economy and reducing debt,” he added.

The cost of energy bills support has now reached £34bn since government schemes were introduced last October to help households and businesses cope with soaring gas and electricity bills in the wake of Russia’s invasion of Ukraine.

The latest figures come following a surprise £5.4bn budget surplus for the chancellor in January, which came in the aftermath of government borrowing hitting a record December high of £27.4bn.

The ONS figures also revealed that interest paid on government debt was £6.9bn in February – down £1.3bn on the year before.

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It marks the first fall in such payments since April 2021 following changes to payments on inflation-linked government bonds.

The latest data takes public sector borrowing to a year-to-date total of £132.2bn, £15.5bn more than the same period this time last year.

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Borrowing forecast still ‘easily achievable’

It comes after the Office for Budget Responsibility (OBR) cut its borrowing forecasts for the current financial year to £152.4bn in last week’s budget, down from its previous £177bn estimate.

Samuel Tombs, at Pantheon Macroeconomics, said the latest figures suggested the OBR’s forecast was “not in serious danger of being breached”.

But he added: “We continue to think, however, that the OBR’s optimism about the medium-term economic outlook is misplaced and that the government will not stick to plans for a substantial fiscal consolidation over the coming years.”

Philip Shaw, an economist at Investec Economics, also said the OBR’s updated borrowing forecast should still be “easily achievable, despite the cost of the various energy support schemes and higher interest payments”.

“Moreover it is possible that a new treatment of the way that student loans are accounted for will be introduced next month, which would lower this year’s deficit by a further £8.6bn,” he added.