UK budget deficit rose more than expected in March

Increased borrowing an 'inevitable consequence' of Covid-19 and energy crisis, Chancellor says

Support for soaring energy bills and higher interest rates led UK government borrowing to jump by more than £18bn in the year to March. Nick Donaldson / PA

UK public sector net borrowing last month totalled £21.5 billion, £16.3 billion more than in March last year, according to the Office for National Statistics.

The figure was the second-highest March borrowing figure since monthly records began in 1993 and more than a Reuters poll of economists had expected.

Meanwhile, the ONS said that government borrowing reached £139.2 billion ($173.9 billion) in the year to March, the fourth highest since records began and £18.1 billion more than the previous year.

The number equates to 5.5 per cent of the UK's GDP.

The full-year figure was £13.2 billion less than forecast last month by the Office for Budget Responsibility, but the ONS pointed out that the numbers are not final and could be revised over the coming months.

The numbers show that the government has paid out £41.2 billion in the last six months to support households and businesses with energy costs.

The cost of borrowing has also risen steeply in the past 12 months. Interest payments on public sector debt rose to £106.6 billion in the year to March, 47 per cent higher than in the previous year, as the rise in the retail price index has led to higher interest payable on government-issued bonds.

Jeremy Hunt, UK Chancellor, says the government has 'a clear plan to get debt falling'. Bloomberg

'Cannot borrow forever'

“These numbers reflect the inevitable consequences of borrowing eye-watering sums to help families and businesses through a pandemic and [Vladimir] Putin's energy crisis,” the UK Chancellor Jeremy Hunt said.

“We were right to do so because we have managed to keep unemployment at a near-record low and provided the average family more than £3,000 in cost-of-living support this year and last.

“We stepped up to support the British economy in the face of two global shocks, but we cannot borrow forever.

“We now have a clear plan to get debt falling, which will reduce the financial pressure we pass on to our children and grandchildren.”

Commenting on the figures, Danni Hewson, head of financial analysis at AJ Bell, said: “Helping households keep the lights on was the right thing to do, but it’s come at a massive cost to the public purse.

“Borrowing over the past year hasn’t broken records which were set during the pandemic and in the wake of the financial crash, but FYE 2023 will certainly be one for the history books.”