The cost of financing government debt reached a new high last month due to soaring inflation, according to data from the ONS, which also indicated that consumers are once again purchasing less than before the COVID outbreak.
As the nation awaits its next leader, the latest official statistics on the status of the public finances and consumer spending makes for bleak reading.
The Office of National Statistics (ONS) stated that public sector net borrowing reached £20 billion last month, which was £3 billion more than what experts had predicted.
September’s record debt interest payments of £7.7 billion were mostly attributable to rising inflation, as a quarter of payments on the £2.4 trillion debt mountain are tied to the RPI.
The ONS reported that government spending increased by £5.8 billion to £79.3 billion as a result of the increase in interest.
It also found that retail sales volumes decreased by 1.4% compared to the previous month, indicating that “consumers were now purchasing less than before the pandemic.”
The loss was significantly worse than the 0.5% decline predicted by economists.
It certainly reflected not only the worsening cost of living problem that has strained consumer budgets this year but also the effect of store closures for the funeral of the Queen.
The data represent the beginning of Kwasi Kwarteng’s brief and contentious stint as chancellor.
He was appointed on the 6th of September and fired weeks later following the market volatility that followed the 23rd of September tax giveaway mini-budget.
Even though the controversial policies have been substantially reversed by the new Chancellor Jeremy Hunt, the outcry caused investors to temporarily demand a higher interest rate to keep UK government debt.
This has affected the cost of fixed-rate mortgages.
It also resulted in the pound plummeting to an all-time low versus the U.S. dollar, with prolonged sterling weakening adding to the country’s import expenses and, consequently, inflation.
The objective of the chancellor’s upcoming fiscal plan will be to restore market confidence in the United Kingdom’s public finances.
As a result of the resignation of the mini-architect, budget’s Liz Truss, it will now fall under the supervision of a new prime minister.
The Tories anticipate that their new leader will be in place within a week – days before Mr. Hunt is scheduled to describe how he intends to balance the budget while keeping some support for struggling households and businesses.
Almost 32 million people, or sixty percent of adults, were already finding it difficult or somewhat difficult to pay their payments, according to a poll conducted by the City monitor.
The Financial Conduct Authority’s financial life survey, conducted between February and June, revealed that the number had increased by six million since 2020 when the economy shut down to combat the COVID-19 epidemic.
Last month, according to a carefully regarded study conducted by GfK, consumer confidence among British consumers remained close to a record low.
The chancellor stated, in response to the ONS data: “Solid public finances are the basis of a robust economy.
“To stabilize markets, I’ve made it plain that protecting our public budget would necessitate tough decisions.
We will do whatever it takes to reduce debt over the medium term and guarantee that taxpayer dollars are used wisely, putting the public finances on a sustainable path as the economy grows.
