Latest government borrowing figures set to spark further calls for cost of living help

Danni Hewson
24 May 2022

•    April borrowing £5.6bn lower than a year before and less than OBR expected
•    Tax receipts up £5.5bn 
•    Council tax rebate cost £3bn 

Danni Hewson, AJ Bell financial analyst, comments on the latest ONS public sector finance figures:

“It’s all about wiggle room and the latest public sector finances suggest the Chancellor might have quite a bit of space in which to formulate help for households struggling to make ends meet. Those calls for assistance will be further amplified by the downward revisions to last year’s borrowing numbers with the ONS cutting its estimate by £7.2bn. But the figures are still eye wateringly high and kids sitting their GCSE maths exams would have no problem working out that the gap between what’s coming in and what’s going out is totally unsustainable in the long term. 

“Debt as a percentage of GDP rose by almost one percentage point over the last financial year and the Chancellor’s deeply concerned that the cost of servicing that debt is going to rise along with interest rates and sky high inflation that’s making life so uncomfortable for so many people. Whilst debt interest payments actually fell by £0.5bn last month compared to the same period the previous year, there’s little doubt the costs will increase and in his spring statement Rishi Sunak warned the figure was forecast to come in at £83bn for the full financial year. 

“And the government did have to borrow an extra £3bn last month to pay for that £150 council tax rebate for people living in bands A-D. But in the plus column all that Covid support is long gone and the increase in national insurance contributions added around £1.4bn to the coffers last month; over the full year the ONS expect the health and social care levy will bring in £18.4bn. The VAT take shot up as hospitality levels returned to normal and with a tight labour market PAYE increased by an impressive 18.3%.

“But the last lot of GDP figures showed an economy in trouble as consumers cut back on day to day spend and there’s no doubt some households are in real trouble and need extra support. But whilst all of us would like to see a bit more in our pay packets, either from a pay rise or a tax cut, the reality is that having that bit extra to spend will only add fuel on the inflation flames. It’s often said the best cure for high price is high prices themselves, but in this situation the high prices are the results of sharp shocks to the supply chain, sanctions and lockdowns. There are no quick fixes or easy answers, just an uncomfortable understanding that the next few months aren’t going to be easy.” 

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.

Contact details

Mobile: 07593 451 437
Email: danni.hewson@ajbell.co.uk

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