Government borrowing halves but recovery slowing

Danni Hewson
26 April 2022

•    Public sector net borrowing £151.8bn FYE March 2022, less than half of previous years £317.6bn 
•    Borrowing up £24bn on that forecast by OBR last month as cost-of-living crisis slows recovery
•    Tax take stronger than expected - £619.9bn up £94.3bn 

Danni Hewson, AJ Bell financial analyst, comments on the latest ONS public sector finances

“This is a real glass half full moment for the UK economy. The phasing out of covid restrictions and the end of support measures like the furlough scheme have helped the country surge back to its feet. The amount of cash being raked in from taxes has bounced back at a faster rate than had been expected, though there is a slight caveat here as inflation has surely played a significant part. VAT receipts are up by £25bn and those soaring prices at the pump along with the restart of the “big commute” has netted an extra £5bn in fuel duty.  However, that doesn’t minimise the £22.5bn in extra PAYE or £6.8bn from self-assessment payments.

“Cash is coming in fast just not fast enough to keep up with continued demands on the public purse and the difference in numbers between what the OBR forecast just last month, and the numbers offered up today just shows what a tightrope the Chancellor is having to walk. He might have had to find £64bn less for subsidies in the last year but that’s been offset by rising debt interest payments which came in at the highest full year valuation on record. Rising inflation will only serve to exacerbate the situation and whilst many people are calling for extra help now as vulnerable households struggle to make ends meet, Rishi Sunak will also be considering the legacy he will leave for future generations.

“Whilst borrowing in March was significantly down on the same period last year it was still almost £12bn above what was needed pre-pandemic, the second highest on record for the month and up on the amount borrowed just the month before – the government is not immune to those rising prices affecting households and businesses.

“How will the next few months play out, how will rising prices further impact the shape of the UK economy? Will investment be curtailed, put off until the numbers look more favourable? How full will the glass remain?”

Danni Hewson
Financial Analyst

Danni spent more than 19 years at the BBC, presenting and reporting on business news across a variety of programmes – including BBC Breakfast, BBC News Channel, BBC Look North and latterly Radio 5 Live’s flagship business programme ‘Wake up to Money’. She is now responsible for producing analysis and commentary across a broad range of subjects at AJ Bell, from financial markets, to economics and personal finance.

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