KPMG comments on public sector finances data - Feb 2022

“Borrowing between April and January was £139bn, compared to the OBR’s year-to-date forecast of £156bn. We expect the OBR to revise down its borrowing projection for 2021-22 by around £20bn next month, although that windfall will be spent almost entirely next year on the Government’s £9bn package of support to help households with rising energy bills.

“The underlying picture for borrowing in January is better than today’s data suggest. Around 20% of taxpayers have not submitted their self-assessment tax return on time this year, taking advantage of the extended window set by HMRC. As the ONS measures self-assessment receipts on a cash basis rather than accruing them to the period when liabilities were created, this will likely result in higher receipts over February and March.

“However, tighter monetary policy will continue to put pressure on payments on the Bank of England’s reserve liabilities, which finance the £875bn stock of gilts under quantitative easing. Every 25 basis points increase in interest rates reduces the public sector net interest saving by £180 million each month, while the Bank’s latest decision to end QE will further increase the cost of refinancing future gilt redemptions.”

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