UK government borrowing soars to new record in December

The £27.4 billion borrowed was the largest amount for December since records began in 1993

Interest payments on UK government debt increased to £17.3 billion last month. PA

UK government borrowing reached £27.4 billion ($33.96 billion) last month, a jump of £16.7 billion on the same month a year earlier, figures from the Office for National Statistics (ONS) show.

Economists had forecast a December reading of £17.3 billion.

At least £7 billion of the leap was down to costs incurred from the government’s energy support schemes, as well as soaring interest payments on debt.

The ONS said the reading was the highest monthly figure for December borrowing since records began in 1993.

It said the UK government spent an estimated £5 billion on its energy price guarantee support scheme for households and businesses last month, as well as £1.9 billion on similar support, such as cold weather payments.

Interest payments soar

Meanwhile, interest payments on government debt jumped to £17.3 billion last month, the highest December figure on record, as a result of stubbornly high inflation.

About a quarter of all UK government bonds are linked to the retail price index of inflation, which has surged to its highest level in decades. Almost £14 billion of the interest payments went directly to index-linked debt.

Debt costs have a two-month time lag, which means last month's figures were affected by October inflation numbers, which hit a 41-year high.

'Stick to the plan'

UK Chancellor Jeremy Hunt said the government had to juggle helping millions of families with the cost of living, with ensuring that the national level of debt was fair for future generations.

"We have already taken some tough decisions to get debt falling and it is vital that we stick to this plan so we can halve inflation this year and get growth going again, creating better paid jobs across the country," he added.

During the financial year to December 2022, the public sector borrowed £128.1 billion, which was £5.1 billion more than that borrowed in the same period last year, the ONS said.

Public sector net debt at the end of last month was £2,215.4 billion or about 88 per cent of GDP.

"Overall, today's worse-than-expected public finances figures will only embolden the Chancellor in the budget on March 15 to keep a tight grip on public finances," said economist Ruth Gregory of Capital Economics.