Chancellor Jeremy Hunt has dashed Conservative hopes for tax cuts in his next budget as the latest government figures show state borrowing hit another record last month.
Hunt vowed to stick to the “tough decisions” needed to balance the books as the rising cost of energy support schemes and rising interest on debt pushed lending to a December record.
The chancellor is said to be preparing to disappoint frustrated Conservative MPs who backed the Truss government’s plan for sweeping tax cuts on a “reduced” budget in March.
The Office for National Statistics (ONS) said government borrowing hit a much higher-than-expected £27.4bn last month, rising by £16.7bn year-on-year and marking the monthly figure. highest since records began.
Official figures showed borrowing skyrocketed by almost £7bn in costs from energy support schemes, with the ONS estimating the government spent £5bn last month on its energy price guarantee to limit losses. annual bills, with an additional £1.9bn paid for power. bill support payments.
Hunt said the government was making “difficult decisions to reduce debt”, adding: “Right now we are helping millions of families with the cost of living, but we also need to make sure our level of debt is fair for generations to come.” future”.
The chancellor added: “We have already made some tough decisions to reduce debt, and it is vital that we stick to this plan so that we can cut inflation in half this year and get growth going again.”
Government debt interest payments rose from £8.7bn to £17.3bn year-on-year last month, the highest December on record and the second highest in a single month, as a result of sky-high inflation .
In the fiscal year to December, the government’s debt interest bill rose to £87.8bn and Britain’s tax watchdog, the Office for Budgetary Responsibility (OBR), estimates it will rise to £115.7bn. sterling for full year ends in March.
The government is paying a heavy price for the Energy Price Guarantee scheme, launched to help households cope with painful gas and electricity bills by limiting the annual bill to £2,500.
The support will be less generous, with the cap rising to £3,000 in April. Companies are offered similar help, but this too will be significantly reduced from the end of March.
The government is also paying households £400 each over six months to help with bills. The cost of this is added to the impact of inflation, which has reached 40-plus-year highs due to the energy and cost-of-living crises, as a large portion of net public sector debt is linked to the RPI.
The ONS said public sector debt reached £2.5 trillion by the end of December 2022, or around 99.5% of gross domestic product (GDP), a level last seen in the early 1990s. 1960.
But Samuel Tombs of Pantheon Macroeconomics said the pressure on the nation’s public finances should ease, with wholesale energy prices falling to make its energy bill less expensive.
It comes as reports claim the government is considering raising the retirement age from 67 to 68, scheduled for 2046, before the end of the 2030s.
Treasury officials are said to want the change to come in 2035, according to Sun. But Work and Pensions Secretary Mel Stride is reportedly pushing for 2042 because increases in life expectancy have not materialized.
Hunt and Rishi Sunak have been warned they were “playing with fire” if the change came before the next general election, even though it would raise billions for the nation’s struggling finances.