KPMG comments on today’s public sector finances data

“Prospects for public finances clouded by a worsening economic outlook” says Michal Stelmach, senior economist at KPMG UK.

“Public sector net borrowing continued to improve in April, coming in £5.6billion lower than a year ago. The latest increase in National Insurance, which kicked in last month, boosted receipts by £1.4bn relative to the previous year. Meanwhile, central government spending on procurement, which includes the NHS Test and Trace programme and the cost of vaccines, fell to its lowest level since August 2021 as free testing was phased out and the vaccine rollout matured.

“However, the good fortune for the Exchequer is likely to run its course in the coming months as the economic outlook worsens and the cost of living crisis intensifies. A more persistent hit to household disposable incomes may prompt the government to step in and provide additional support, which would result in higher spending.

“The cost of servicing debt remained elevated on a 12-month rolling basis against the backdrop of higher inflation, rising interest rates, and quantitative tightening, which reduces the share of debt financed at a more favourable rate. Following the latest spike in RPI inflation, we now expect monthly interest spending to reach an eye-watering £16bn in June, exceeding the annual day-to-day budget of the Home Office.”

-Ends-

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