by Joanna Marchong
Last week, the Office of National Statistics (ONS) released new stats on the state of the public sector finances for June 2022. These figures show that almost a year after the pandemic, we still have high spending levels, an equally shocking level of borrowing and significant debt payments.
It comes after a period of exceptionally high inflation rates at 9.4 per cent, coupled with lower pay (this quarter saw a record fall in regular pay of 2.8 per cent). Households have been stretching their budgets since the pandemic began, and there seems to be no end in sight.
The ONS’s figures show that central government bodies spent £86 billion on day-to-day expenditure in June 2022. That’s up £9 billion from June 2021. Not only has government spending increased, but initial estimates show that the public sector has also spent more than it received in taxes and other income.
Spending is so high that they had to borrow nearly £23 billion - £600 million more than the Office for Budget Responsibility (OBR) forecasted. Simply put, more borrowing equals more debt. At the end of this month, public sector net debt was almost £2.4 trillion or over 96 per cent of GDP, a £183 billion increase compared to last year. This is something we should all be concerned about.
That debt isn’t free: it needs paying off. High interest rates have helped this month’s debt interest payments soar by an extra £10 billion from last year - enough to pay for a 2p cut in the basic rate of income tax.
In total debt interest cost taxpayers £19.4 billion in June this year - equivalent to the government transport capital budget for 2021/22. That’s taxpayers’ money that should be going on frontline services or towards much needed tax cuts, being used to pay off the national debt.
At the same time, the amount the Treasury is raking in is on the rise. Record-breaking levels of inflation meant that central government receipts soared by nearly £8 billion compared to last year (over £5 billion of which was tax revenue), but taxpayers are not currently seeing that translated into tax cuts to help families with the cost of living crisis.
Ultimately, poor management of public sector finances can lead us into a future of more borrowing, unstrategic spending, and a continuous stream of disappointment for taxpayers. After the pandemic, the government said they would ‘build back better’, but a year since its end, the statistics show little has changed with the approach to our economy.