Public sector net borrowing in December came in at £16.8bn, £7bn lower than a year earlier, according to EY.
Data is also now available for the first nine months of fiscal year 2021-2022 and shows borrowing of £146.8bn, which is £13.0bn lower than the OBR’s forecast.
It revealed “strong growth” in tax receipts continues to keep public sector net borrowing running below the forecast, despite the “increasing pressure” on government spending from higher debt servicing costs.
It added that as things stand, there’s a “good chance” borrowing will come in below the OBR’s full-year forecast. But this will be influenced by the size of any measures announced by the Government to ease pressure on households from high fuel bills.
The firm also said central government receipts continued to outperform, up 15% year-on-year (y/y) over the fiscal year to date, with economic growth running ahead of the OBR’s relatively “cautious” forecast.
However, that’s increasingly being offset by the upward pressure on government spending caused by higher debt servicing costs, with much higher-than-expected inflation raising the payments due on index-linked gilts.
Martin Beck, chief economic advisor to the EY ITEM Club, said: “Similar pressures on spending are likely to persist over the remaining three months of the fiscal year but, as things stand, borrowing should still come in below the OBR’s full-year forecast of £183bn.
“However, this will be influenced by what, if any, measures the Government announces to take the pressure off households’ finances from rising energy bills. The OBR’s judgements on the medium-term outlook will play a role here.”
He added: “The EY ITEM Club thinks that the OBR is too gloomy on medium-term growth prospects, although the next forecast on 23 March is probably too soon for the OBR to make significant revisions. There’s also significant uncertainty about how the OBR’s assumptions for inflation and interest rates will evolve.”