- November's public finances data saw a significant year-on-year overshoot in UK public sector net borrowing, reflecting the impact of support schemes to help households and businesses pay their energy bills. The ONS continues to describe the cost of these schemes as “initial indicative estimates”, so large revisions are likely.
- It will be some time before a true picture of the state of the public finances emerges. But the increase in the energy price guarantee and end of universal support will mean that the cost of energy support measures will be much lower from spring next year.
Martin Beck, chief economic advisor to the EY ITEM Club, says: “Public sector net borrowing (excluding public sector banks) totalled £22bn in November. This was £13.9bn higher than the same month a year earlier, with the increase largely due to the cost of the Government’s energy support programmes. This month's release included the ONS's first attempt to incorporate the costs of the energy bills relief scheme for companies. But the estimates of the costs of the schemes for both households and companies were labelled as “initial indicative estimates", so there's scope for large revisions to November's outturn in the future.
“November's deficit took borrowing over the first eight months of fiscal year 2022-23 to £105.4bn, £7.6bn lower than at the same point in 2021-22. On the face of it, this implies that borrowing is on track to undershoot the OBR's full-year forecast of £177bn. But it is almost impossible to be confident about this, given the uncertainty around the future path of energy prices – and, therefore, the cost of the energy price guarantee – and the lack of a monthly OBR forecast to benchmark against. The OBR is due to publish its month-by-month forecast later today, so the EY ITEM Club expects that should at least provide some assistance.
“The £500 increase in the energy price guarantee from next April and the Government's decision not to continue universal support for households and businesses means that the cost of the energy support schemes should be much lower in fiscal year 2023-24. Therefore, the EY ITEM Club expects that beyond the current fiscal year, public sector borrowing should steadily reduce.”