Britain is tipped to have borrowed nearly £23bn last month to help pay for capping energy bills at £2,500, according to City analysts’ consensus forecast.
Fresh numbers out from the Office for National Statistics on Tuesday are expected to show the gap between what the government generates in revenue from taxes and spends on public services widened from £16.7bn in February.
Chancellor Jeremy Hunt and Prime Minister Rishi Sunak have been covering the difference between what energy supplies pay to supply homes with gas and electricity and keeping typical bills at £2,500 for several months.
While that has averted a huge hit to families’ living standards, it has meant the UK has had to borrow tens of billions of pounds to fund the support package.
Better than expected economic growth since the turn of the year has also kept a lid on the UK’s debt bill. People spending more lifts the government’s tax revenues.
“Borrowing has consistently come in below the [Office for Budget Responsibility’s] expectations over of the past six months, reflecting a combination of resilient tax receipts and lower-than-expected costs of subsiding energy bills,” analysts at consultancy Oxford Economics said.
“The OBR’s full-year fiscal forecast is £152.4bn so, absent revisions and factoring in differences in the treatment of student loans, borrowing would need to have come in below £28.8bn in March to undershoot this forecast,” they added.
Last week’s shock inflation numbers, which showed it hung in the double digits at 10.1 per cent last month, sparked bets in the City that the Bank of England will hike interest rates to a peak of five per cent, heaping more pressure on the government’s balance sheet.
The UK has to pay investors’ interest on the debt it sells to fund its spending programme.
In what is teed up to be a quieter week for the markets, Bank of England deputy governor Ben Broadbent will deliver a speech on Tuesday at the National Institute of Economic and Social Research think tank.
Investors will likely be combing through his remarks for signs on whether the Bank agrees with the market’s assessment that borrowing costs are still on an upward path.
Across the pond, Wall Street is bracing for first quarter GDP data that will indicate whether the US economy is headed for a recession.
Last month’s banking turmoil sparked concerns that regional lenders – which are vital to the functioning of the world’s biggest economy – could rein in credit to conserve cash to withstand future bank runs.
Bank of Japan officials will announce their latest interest rate decision on Friday.
Data from building society Nationwide, also on Friday, could show yet another month of falling house prices after March’s 0.8 per cent decline.
On the corporate front, supermarket Sainsbury’s tops the billing with final results out on Thursday. UK bank earnings season kicks off on Wednesday with Asia-focused lender and FTSE 100 listed Standard Chartered updating markets. Barclays and NatWest will also post first quarter results this week.
London’s FTSE 100 posted a decent performance last week, adding 0.9 per cent to close at 7,914.14 points.