Government borrowing higher than expected in April

Public sector borrowing in April reached 24.3bn, 4.9bn higher than the same month last year. The figure exceeded the 20.9bn forecast from the Office for Budget Responsibility. Higher tax receipts were more than offset by higher spending on benefits and other costs. Spending on benefits rose by 2.7bn year over year, largely due to inflation-linked increases to many benefits and earnings-linked increases to the state pension. Debt interest payments were 10.3bn, up 0.9bn from a year earlier and a record for April. Borrowing came in above the OBR’s March projection, driven by higher central government spending. Energy price pressures linked to the Iran war lowered growth forecasts, suggesting borrowing may stay elevated and require further fiscal policy adjustments.

"Borrowing, the difference between spending and income from taxes, was 24.3bn last month, 4.9bn higher than at the same point last year, the Office for National Statistics (ONS) said. The figure was also higher than the 20.9bn that had been predicted by the government's independent forecaster, the Office for Budget Responsibility (OBR). ONS chief economist Grant Fitzner said April's borrowing figure was "substantially higher" than a year earlier, with higher tax receipts being "more than offset by higher spending on benefits and other costs"."

"The figures showed spending by government on benefits rose by 2.7bn from the same point last year, which the ONS said was largely caused by inflation-linked increases to many benefits and the earnings-linked rise to the state pension. Debt interest payments were 10.3bn, up 0.9bn from a year earlier and a record high for the month of April."

""Public sector borrowing for April came in above the OBR's March projection, largely driven by higher spending by the central government," said DennisTatarkov, senior economist at KPMG UK. "Given the increasingly uncertain economic outlook, this could set the tone for the rest of the fiscal year." Tatarkov said the impact of the Iran war on energy prices means that economic growth forecasts for this year are now well below the what the OBR had predicted in March."

""This means that public sector borrowing is likely to remain elevated in the medium term, potentially forcing the chancellor's hand to make more tweaks to fiscal policy at the time of the autumn Budget," he said."

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