The UK budget deficit exceeded expectations and marked the second biggest shortfall on record for the month of August, driven by a surge in interest payments, data published by the Office for National Statistics showed on Tuesday.
Public sector net borrowing, excluding public sector banks, totaled GBP 20.5 billion in August 2021. This was the second-highest August borrowing since monthly records began in 1993 and far exceeded the economists’ forecast of GBP 15.6 billion.
Nonetheless, this was GBP 5.5 billion less than in August 2020.
Central government receipts grew GBP 5.3 billion in August, while central government expenditure fell GBP 1 billion from last year. Due to the sharp rise in retail price inflation, interest payment on government debt surged 83.8 percent from last year.
During April to August period, borrowing reached GBP 93.8 billion, the second highest financial year-to-August borrowing since monthly records began in 1993. The government expects the deficit to hit GBP 233.9 billion by the end of the financial year ending 2022.
At the end of August, public sector net debt excluding public sector banks reached around 97.6 percent of GDP, the highest ratio since the 98.3 percent recorded in March 1963.
Commenting on the ONS data, Chancellor Rishi Sunak said, “. we are determined to get our public finances back on track – that’s why we have set out the focused and responsible steps we are taking to keep debt under control.”
With the Chancellor intent on signaling in his Budget on October 27 that the fiscal stimulus seen since the pandemic is now firmly at an end, the big fiscal boost to the economy last year will soon become a fiscal drag, Ruth Gregory, an economist at Capital Economics, said.