- Government borrowing jumped to £14.3 billion in February – the second highest for the month since records began
- The amount coming into government coffers was up 9.3% thanks to an increase in income tax and national insurance payments
- But spending also increased, including an extra £5.5 billion in debt interest as the ONS highlighted the later timing of some payments
Danni Hewson, AJ Bell head of financial analysis, comments on the latest public sector finances:
“With the chancellor under pressure to act swiftly to protect households from the impact of the latest energy price shock, today’s numbers won’t make great reading.
“Rachel Reeves must feel like she’s been squeezed between a rock and a hard place as the current geopolitical instability rams home the need to spend more on defence but also leaves ordinary workers at risk of another inflation burn.
“After last month’s record surplus, today’s numbers take a worrying step back. Borrowing for the month of February came in at the highest on record, bar 2021 when the state was paying many people’s wages during the Covid pandemic.
“The amount of cash coming in has risen substantially thanks to inflation busting wage rises colliding with frozen tax thresholds and the increase in employers’ National Insurance, but that extra £8.1 billion barely touched the sides alongside an £8 billion rise in spending which pretty much wiped out those winnings.
“Debt interest jumping by £5.5 billion to £13 billion must feel like a great big weight bearing down on the lid of the Treasury’s coffers. Some of the increase was down to a quirk in the timing of coupon payments, which were settled in February rather than January thanks to the weekend landing at the turn of the month.
“Overall these figures shine a bright light on the difficult decisions facing Rachel Reeves, who must have been looking forward to that period of stability she has spoken so often about – especially as borrowing for the year to February is down 8.7% compared to the same period a year ago.
“It may be a headline writer’s dream, but ‘Trumpflation’ is a sobering reality with the conflict in the Middle East fundamentally changing the economic outlook for the UK. The additional headroom the chancellor has worked hard to conjure is beginning to look rather insubstantial in the face of current events.”
