The spike in borrowing costs threatens the government’s economic plans, with Chancellor Rachel Reeves facing pressure after figures last week showed the UK economy had flatlined. The government has said growing the economy is its main priority in order to boost living standards.
Last month, the interest charged on government debt was £8.3bn, which was £3.8bn more than it was the year before.
The amount marked the third-highest December debt interest repayments since monthly records began in January 1997.
Alex Kerr, UK economist at Capital Economics, said against the backdrop of sluggish economic growth and high interest rates, “December’s overshoot in borrowing is further disappointing news for the chancellor”.
He said the majority of the higher borrowing was due to a one-off £1.7bn payment from the government to the private sector to repurchase military accommodation.
The borrowing figure for December includes lots of estimates which are often revised at a later date. This is particularly true around this time of year when lots of people submit self-assessment tax returns, which increases the government’s revenue.
However, borrowing in the financial year so far is £129.9bn, £8.9bn more than the same period a year earlier and the second-highest financial year-to-December borrowing since monthly records began.
The year-to-date figure is only outstripped by the borrowing seen at the height of the Covid pandemic in 2020.
Following the release of the data, Chief Secretary to the Treasury Darren Jones said the government would “root out waste to ensure every penny of taxpayer’s money is spent productively”.
“Economic stability is vital for our number one mission of delivering growth,” he added.
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