The Office for National Statistics (ONS) has confirmed that the UK’s net debt has reached £2.6 trillion by the end of May, equivalent to approximately 100.1% of the country’s gross domestic product (GDP).
This marks the first time since March 1961 that the debt-to-GDP ratio has exceeded 100%.
The significant increase in government borrowing, which amounted to £20 billion in May, can be attributed to various factors, including substantial spending on energy support schemes, inflation-linked payments, and interest payments on debt.
Compared to the previous year, borrowing in May surged by £10.7 billion, making it the second-highest May borrowing since monthly records began in 1993.
Economists had initially predicted a borrowing amount of £19.5 billion for May, but the actual figure surpassed those expectations.
Chancellor Jeremy Hunt acknowledged the challenging decisions the government has had to make in response to the pandemic and Russia’s invasion of Ukraine.
While billions were spent to safeguard families and businesses from these crises, the Chancellor emphasized the importance of avoiding an overwhelming debt burden on future generations.
Thus, difficult but necessary decisions were taken to balance the budget, lower inflation, stimulate economic growth, and reduce debt.
According to ONS estimates, energy support schemes alone have cost the UK £29.7 billion in the first half of the year.
Furthermore, borrowing in the first two months of the current financial year has already reached £42.9 billion, surpassing the figure from the same period last year by £19.6 billion and exceeding the OBR’s prediction of £40.8 billion.
Nevertheless, the ONS has revised its estimate for borrowing in the previous financial year, ending in March 2023, down by £3 billion to £134.1 billion.
Although this still represents an increase of £11.8 billion compared to 2021-22, it remains the fourth highest borrowing figure since monthly records began.
The latest developments cast doubt on one of Prime Minister Rishi Sunak’s five key priorities for 2023.