KPMG comments on today’s public sector finances data

“Chancellor set for a £30bn fiscal boost ahead of next month’s Budget” says Michal Stelmach, senior economist at KPMG UK.

“Public sector net borrowing was in surplus by £5.4bn in January, a big fall from the £12.5bn surplus last year as the energy support package continues to exert pressure on the public finances. However, Government spending on subsidies – which include the energy support – so far came in £6.8bn below the £44bn expected by the OBR this fiscal year, suggesting that milder weather and lower demand for gas have helped keep the cost down.

“Year-to-date borrowing has so far undershot the OBR’s forecast by £30.6bn, which could tempt the Chancellor to offer a pay increase to public sector workers as part of his Budget next month, hoping to prevent another wave of strikes.

“Looking ahead, we estimate that the Energy Price Guarantee is now likely to cost only around a half of the OBR’s £12.8bn forecast in 2023-24, thanks to lower wholesale energy prices. However, this will be largely offset by the new Energy Bills Discount Scheme for businesses with an estimated cost of £5.5bn, providing little near-term relief against a backdrop of wider spending pressures.”

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