Chancellor Rishi Sunak ran a surplus for his first time in office but increased debt servicing costs added to the government’s borrowing.
The UK ran a surplus of £2.9bn in January according to the Office for National Statistics (ONS), up from net borrowing of £5.4bn last year as furlough and other support schemes ate into government finances.
But debt servicing costs rose by £4.5bn as those schemes added billions to the national debt, with public sector borrowing at 15% of GDP its highest rate since the end of the second world war.
Public sector net debt in total was £2.32trn, or 94.9% of GDP, or levels not seen in 60 years.
“In total, more than 50 schemes have been announced by the UK government and the devolved administrations to support individuals and businesses during the coronavirus pandemic”, the ONS said in its release.
“Lower receipts combined with the additional cost of these schemes have resulted in record borrowing.”
The high debt servicing costs cut Sunak’s breathing room in anticipation of the Spring statement, bringing the figures closer to those expected by the Office for Budget Responsibility (OBR).
Public finances are expected to be stretched over 2022 as inflation continues at its fastest rate in 30 years and the Bank of England plans for interest rate hikes.
“We provided unprecedented support throughout the pandemic to protect families and businesses and it has worked, with the UK seeing the fastest economic growth in the G7 last year,” said Sunak.
“But our debt has increased substantially and there are further pressures on the public finances, including from rising inflation.
“Keeping the public finances on a sustainable path is crucial so we can continue helping the British people when needed, without burdening future generations with high debt repayments.”
The public purse was however bolstered by a £4bn increase in income tax receipts, with the labour market improving from last January when 5mln workers were furloughed and unemployment was around 0.8 percentage points higher.