Public Sector Finances, Uk December 2022 - largest December interest payable on record

24th January 2023

Public sector borrowing (PSNB ex) in December 2022 was £27.4 billion, the highest December figure since monthly records began in January 1993, largely because of a sharp rise in spending on energy support schemes and an increase in debt interest.

December's borrowing was £16.7 billion higher than that of December 2021 and £9.8 billion higher than the latest official forecast published by the Office for Budget Responsibility (OBR); largely because of student loans assumptions made by the OBR (see Section 3).

Central government debt interest payable was £17.3 billion in December 2022, the highest December figure since monthly records began; the increase in interest payable is largely because of the effect of Retail Prices Index (RPI) changes on index-linked gilts.

In the financial year-to-December 2022, the public sector borrowed £128.1 billion, £5.1 billion more than that borrowed in the same period last year, but £2.7 billion less than forecast by the OBR.

Public sector debt (PSND ex) at the end of December 2022 was £2,503.6 billion or around 99.5% of gross domestic product (GDP), with the debt to GDP ratio at levels last seen in the early 1960s.

Public sector debt excluding the Bank of England was £2,215.4 billion or around 88.0% of GDP, £288.2 billion less than the wider measure.

Central government net cash requirement (excluding UK Asset Resolution Ltd and Network Rail) was £23.1 billion in December 2022, bringing the total for the financial year-to-December 2022 to £100.3 billion.

In the coming months, we plan to include an additional balance sheet aggregate, public sector net worth (PSNW), and present a newly formatted Public Sector Finance (PSF) release.

Borrowing in December 2022
Initial estimates for December 2022 show that the public sector spent more than it received in taxes and other income, requiring it to borrow £27.4 billion, £9.8 billion more than the £17.6 billion forecast by the Office for Budget Responsibility (OBR).

Following the February 2022 announcement of changes to terms for Student Loans in England, in their Economic and Fiscal Outlook (March 2022) the OBR estimated an £8.6 billion upward revaluation of outstanding student loans.

Recorded as a capital transfer from the private sector to central government, this transfer reduced the OBR's estimate of public sector borrowing in December 2022 and accounts for most of the difference between the provisional Office for National Statistics (ONS) and the OBR borrowing estimates. We will record the full impact of the changes to student loan arrangements when more definite estimates become available.

Central government receipts
Central government receipts in December 2022 were estimated to have been £74.6 billion, which was £3.9 billion more than in December 2021. Of these receipts, tax revenue increased by £3.4 billion to £56.1 billion.

Central government expenditure
Central government bodies spent £91.2 billion on current (or day-to-day) expenditure in December 2022, which was £16.4 billion more than in December 2021.

Energy Price Guarantee schemes
In September 2022, the UK Government announced further plans to help households and businesses manage the cost of energy. These include the Energy Price Guarantee (EPG) for households and the Energy Bill Relief Scheme (EBRS) for businesses across the UK.

This month sees the third round of payments under the scheme for households and businesses, with the associated central government expenditure recorded within the "subsidies - other" category in Tables 3 and 7. This month's figure is an initial indicative estimate, which will be revised over the coming months.

Energy Bills Support Scheme
The Energy Bills Support Scheme (EBSS), as explained on GOV.UK, is a government scheme announced in April 2022, giving households in Great Britain (with a domestic electricity contract) £400 towards the cost of their energy bills.

It is paid in six evenly spread portions between October 2022 and March 2023. This month sees the third round of EBSS payments, as shown on GOV.UK, with £1.9 billion of central government expenditure recorded as a current transfer from government to households, and presented within the "other expenditure" category in Tables 3 and 7.

Interest payable on central government debt
Since mid-2021, the cost of servicing central government debt has increased considerably. These rising costs do not principally reflect recent increases in the level of government debt, nor is the change in servicing costs driven by large increases in the interest - or coupon - payments by government. Instead, the recent high levels of debt interest payable are largely a result of higher inflation, with the interest payable on index-linked gilts rising in line with the Retail Prices Index (RPI).

In December 2022, the interest payable on central government debt was £17.3 billion, the largest December interest payable on record and the second largest in any single month behind the £20.0 billion recorded in June 2022. Of this £17.3 billion, £13.7 billion reflects the impact of inflation on the index-linked gilt stock.

Note
To read the full ONS report go to
https://www.ons.gov.uk/economy/governmentpublicsectorandtaxes/publicsectorfinance/bulletins/publicsectorfinances/december2022