- The UK government borrowed £16.7 billion in February 2023, the highest figure for the month since records began
- Spending on energy support schemes came in at around £9.3 billion
- Debt interest payments £1.3 billion lower than last year’s figure
Danni Hewson, AJ Bell head of financial analysis, comments on the latest UK Public sector finances:
“Cushioning households from the full impact of those sky-high energy costs has come with a huge price tag for the UK government. More than nine billion pounds was doled out in February to cover the cost of a combination of schemes; from the price guarantee to that support payment that’s been popping into people’s accounts in welcome instalments since October last year.
“That support is set to continue but in a slightly watered down way, with that £400 support payment vanishing, though average bills will be kept down to the £2,500 a year mark after last week’s budget U-turn.
“The good news for the government is that the cost of that guarantee will fall substantially from next month as wholesale prices tumble and it should be rendered obsolete by the time Ofgem’s next price cap comes into effect in July.
“And it’s worth noting that a billion pounds was raised thanks to the government’s windfall tax on energy companies’ profits, which will go someway to offsetting support costs.
“There was also the glint of a silver lining within February’s economic grey clouds as the cost of servicing all that debt fell slightly compared to last year thanks to the vagaries of index linked gilts.
“But the debt to GDP ratio has popped over the 99% mark, hitting levels last seen in the early 1960’s – a number that will focus minds in a Treasury tasked with bringing debt levels under control.
“Put bluntly, the government is still spending a whole lot more than it’s got coming in and whilst the incoming figure has shot up compared to last year as life tracks back to its pre-Covid patterns, there have also been setbacks.
“The parlous state of the housing market following last year’s mini-Budget and the following rapid increase in mortgage costs has dented confidence and stamp duty take is down a whopping 27.6%.
“It is an improving picture, but the impact of ricocheting from Covid to an inflationary spiral has been significant and it will make future spending choices more difficult, at least in the short term.”
