THE UK's public finances have taken a major hit - with government borrowing hitting a new high for December driven by supporting households with their energy bills and risking debt interest costs.

December’s borrowing - the difference between spending and tax income - was £27.4bn, was £16.7bn higher than in December 2021 and the highest since monthly records began in January 1993. Economists had forecast £17.75bn.

Debt interest payable by the central government amounted to £17.3bn, also the highest December figure on record.

It comes as the national debt - the total amount the UK government owes - hit £2.47 trillion at the end of November.

That is nearly as much as the value of all the goods and services produced in the UK in a year - known as Gross Domestic Product (GDP).

The debt has reached one of the highest debt to GDP levels since the early 1960s.

The Office for National Statistics (ONS) said inflation was the main factor behind the rise in borrowing.

While gas prices have begun to come down, the typical UK energy bill is still almost twice what it was before Russia invaded Ukraine.

To help them cope with spiralling energy prices, the government is giving households £400 towards the cost of their energy bills, paid in six segments between October and March.

The ONS says that the cost of energy bill support has added around £7bn to the December borrowing figures.

Businesses have also received support with their energy bills, but this will be scaled back drastically from April.

The state of public finances are expected to continue to be used by ministers to justify a tough stance over public sector pay increases as strikes continue to cripple many services.


Public finances have also been hit by the sharp rises in the interest payable on UK gilts, or bonds, which the government sells to international investors to raise the money it needs. This is largely said to be because many gilts are "index linked", meaning the government's repayments rise in line with inflation which is currently at double-digit levels.

The independent Office for Budget Responsibility has forecast that the government's debt interest bill alone will come in at almost £116bn in the financial year to March. December's figure took the total to date to £87.8bn.

Ruth Gregory, senior UK economist at Capital Economics, said the borrowing figures "provided more evidence that the government's fiscal position is "deteriorating fast" and further limits chances of any budget giveaways.

She said borrowing was well above what economists had expected, debt interest payments were at an "eye-watering" level, government spending was high, and there were "pressures from the weakening economy".

Divya Sridhar, economist at PwC pointed out that falling national debt was one of the five priorities set out by the Prime Minister at the start of the year but the Office for Budget Responsibility expects net government debt as a proportion of GDP to rise by five percentage points over the next year.

"However, slowing inflation, reduced energy bills support and indications that there will be no immediate tax cuts in the spring budget are all likely to bolster public finances in the short term," she said.

Chancellor Jeremy Hunt said: "Right now we are helping millions of families with the cost of living, but we must also ensure that our level of debt is fair for future generations.

"We have already taken some tough decisions to get debt falling, and it is vital that we stick to this plan so we can halve inflation this year and get growth going again - creating better paid jobs across the country."