UK debt surpassed 100% of gross domestic product for the first time since 1961 after public sector borrowing doubled in May.
The ONS said on Wednesday that net government debt reached 100.1% of GDP last month, the first time the figure has surpassed 100% since March 1961.
Public sector net borrowing reached £20bn in May, £10.7bn more than in the same month a year earlier, mainly because of the cost of social security benefits and energy support programmes.
It was the second-highest borrowing figure for May since monthly records began in 1993 and topped the £19.5 billion forecast by economists polled by Reuters and the £18.3 billion forecast by Britain’s Office for Budget Responsibility watchdog.
Borrowing in the financial year to May 2023 was £42.9bn, £19.6bn more than in the two months to May 2023 and £2.1bn above the OBR forecast.
Ruth Gregory, an economist at Capital Economics, said of Chancellor of the Exchequer Jeremy Hunt: “May’s poor public finances figures cast further doubts on the chancellor’s ability to deliver big pre-election tax cuts, while still meeting his fiscal rules.”
The ONS reported that in May “additional costs of energy support schemes and increases in benefit payments and staff costs all boosted public sector spending”.
It also showed that the year-on-year increase in government revenue last month was the slowest in any month since March 2021.
Economist Samuel Tombs at Pantheon Macroeconomics said the sharp deterioration in the outlook for debt interest payments following the recent spike in government bond yields “suggests that the chancellor has no scope to cut taxes before the next general election, which must be held by January 2025”.
He calculated that the OBR would raise its forecast for debt interest payments by around £39bn in 2024-25 and by around £17bn five years later, based on current levels of government bond yields and market expectations for interest rates.
Mr Hunt said the government “has made difficult but necessary decisions to balance the books to halve inflation this year, boost economic growth and reduce debt”. Separate data from the ONS on Wednesday showed that inflation failed to fall as expected and remained at 8.7% last month.
Michal Stelmach, senior economist at KPMG in the UK, said that with the general election looming, “finding a sustainable solution to balance the books amidst new election promises will undoubtedly be a tricky one for the government in the coming months. Task”.