UK government borrowing higher than expected in February

Government borrowing in February was higher than expected, according to official figures.

Borrowing was £8.4bn, in part because of higher benefits payments such as cost-of-living support.

Economists had predicted that borrowing would come in at £6bn for the month.

However, the Office for National Statistics (ONS) said the February number was £3.4bn lower than a year earlier, as the growth in tax receipts exceeded growth in spending.

It was also the fourth consecutive month where borrowing was down on the previous year.

The government tends to spend more than it raises in tax.

To fill this gap it either borrows money, raises taxes, or cuts spending.

To borrow money the UK government sells financial products called bonds or gilts.

A bond is a promise to pay money in the future. Most require the borrower - the government - to make regular interest payments over the bond's lifetime.

Debt, which is the total amount of money owed by the government that has built up over years. remains at levels last seen during the early 1960s as a percentage of the UK's economic output.

In February, debt was 97.1% of Gross Domestic Product (GDP), which is a measure of output.

However, in February interest payable on debt fell by £1.1bn to £6.8bn, mainly because interest on government bonds is linked to one of the measures of inflation - the retail prices index, which had dropped.

One of the government's key pledges is that debt should be falling as a percentage of GDP in five years' time.

According to the Office for Budget Responsibility (OBR) - an independent body that looks at the government's plans on tax and spending - that pledge is on track to be met.

However, debt is forecast to keep rising until 2028-29.

'Turning a corner'

The larger than expected budget deficit in February was a result of a variety of factors including cost-of-living payments, an inflation-linked increase in benefits and a rise in government spending on goods and services as a result of higher inflation.

Chief secretary to the Treasury Laura Trott said that it was "right that this government provided billions of pounds to support individuals and businesses during Covid, and pay half of people's energy bills after Putin's invasion of Ukraine".

She added: "Because of the difficult decisions we have taken, the economy is turning a corner, inflation is falling and wages are up."

But Danni Hewson, head of financial analysis at AJ Bell, said: "Just weeks after Jeremy Hunt announced supposed vote-winning tax cuts amid speculation that further giveaways are in the offing, it emerges the government has had to borrow more than had been expected for the month of February."

While cost-of-living support payments are due to end, she said uprated benefit costs would "have to be factored into the sums of any chancellor making tax and spend decisions for the future".

Nevertheless, she said, with borrowing down for the fourth month in a row: "There are tentative signs that the volatility created by the pandemic and the energy crisis is behind us, though the legacy left behind will weigh on public finances for generations to come."