The figures, from the Office for National Statistics, provide a difficult backdrop for the chancellor, Kwasi Kwarteng, ahead of his mini-budget on Friday to tackle the cost-of-living crisis. Government borrowing was £2.6bn less than in August 2021, but £6.5bn more than the same month in 2019 before the coronavirus pandemic. The figure of £11.8bn was almost double the £6bn forecast in March by the Office for Budget Responsibility (OBR), the Treasury’s independent forecaster, mainly due to a rise in government spending. It was also higher than the £8.8bn forecast by City economists. The government spent more on debt interest as well as social benefits due to paying cost-of-living grants to low-income households. Interest payable by central government rose to £8.2bn last month, the highest figure for August since records began in 1997, as high inflation, as measured by the retail price index, hit the UK government bonds. Speaking ahead of the announcement of an energy support package for businesses, Kwarteng said: “Our priority is to grow the economy and improve living standards for all – with strong economic growth and sustainable public finances to go hand in hand. “As chancellor, I am committed to reducing debt in the medium term. However, in the face of a major economic shock, it is absolutely right for the government to act now to help families and businesses, as we did during the pandemic.” Businesses received an emergency government support package, including a cap halving the price they pay for energy for six months from October 1, to help them get through the winter. Liz Truss has already announced that household energy bills will be capped for the next two winters at £2,500 for the average home, after prices soared as a result of Russia’s war in Ukraine. The government’s tax take increased last month, pushing its receipts to almost £70bn, up £5.6bn on August last year, but slightly below OBR forecasts. Government borrowing came close to the OBR’s forecast in the first five months of the current financial year, but large overshoots are likely from October, when support for household and business energy bills begins. Subscribe to Business Today Get ready for the business day – we’ll point you to all the business news and analysis you need every morning Privacy Notice: Newsletters may contain information about charities, online advertising and content sponsored by external parties. For more information, see our Privacy Policy. We use Google reCaptcha to protect our website and Google’s Privacy Policy and Terms of Service apply. Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said overall borrowing this year “will be much higher because of the new government’s fiscal activism. Granted, loans to energy suppliers to facilitate a price freeze of £2,500 for the average household would likely boost debt but not borrowing, as it would be seen as a financial transaction, involving the acquisition of an asset by the state.’ The government is expected to outline its measures to help households on Friday in its mini-budget. Mr Tombs added: “The real uncertainty surrounds whether the Government will attempt to cut spending to partly fund these tax cuts, but with departmental spending under pressure from rising wages and energy costs, margins efficiency savings are moderate’. Martin Beck, chief economic adviser at forecasting group EY Item Club, said: “The significant fall in wholesale energy prices recently suggests that the cap on bills will prove less costly than initial estimates suggested. “Meanwhile, Friday’s budget event should also provide greater clarity around the new prime minister’s tax cut agenda. Tax cuts will help lending, but reducing the rate at which the tax burden is projected to rise should support activity and may boost the economy’s growth potential.”
