According to official figures, the UK government’s borrowing increased by more than £18 billion in the year leading up to March due to the skyrocketing cost of energy bill assistance and debt interest.

The Office for National Statistics stated the public sector borrowed £139.2 billion during the most recent fiscal year, the fourth-highest amount since records began and £18.1 billion more than in 2021-22.

However, the amount was less than the £152.4 billion predicted by Britain’s fiscal watchdog, the Office of Budget Responsibility, one month prior.

This is despite the government spending £41.2 billion in the last six months to assist households and enterprises with energy costs.

In addition, sky-high inflation drove public sector debt interest payments to £106.6 billion, which is 47% higher than the previous year, as painful increases in Retail Prices Index inflation pushed up the interest payable on index-linked gilts.

Chancellor Jeremy Hunt stated that it was appropriate for the government to spend on energy assistance during the cost-of-living crisis but cautioned that “we cannot borrow forever.”

He stated, “These figures reflect the inevitable results of borrowing eye-popping sums to assist families and businesses during the pandemic and Vladimir Putin’s energy crisis.”

He added, “We supported the British economy, but we cannot continue to borrow indefinitely. We now have a clear plan to reduce debt, which will alleviate the financial burden passed on to our children and descendants.”

The ONS reported that the government’s borrowing reached £21.5 billion in March, an increase of £16.3 billion from the previous year and the second-highest March borrowing on record due to energy support payments.

The ONS stated that it revised its borrowing estimates downward by £14.6 billion in the eleven months leading up to February.

At the end of March, public sector debt, excluding state-supported institutions, was approximately 99.6% of gross domestic product, a level not seen since the early 1960s.

The estimates indicate that the public sector spent more than it received in taxes last month, spending £110.3 billion compared to £88.8 billion in receipts. According to the ONS, the amount borrowed in March was £14.5 billion more than in March 2020, at the commencement of the coronavirus pandemic.

Since it was implemented in October of last year to help households and businesses manage soaring gas and electricity bills due to Russia’s invasion of Ukraine, government borrowing has skyrocketed. Mr Hunt announced in the spring Budget last month that the energy price guarantee capping annual bills at £2,500 will be prolonged for another three months, from April to June.

Two of the highest-ever monthly interest payments on government debt occurred during the previous fiscal year.

In March, interest payments on debt totalled £3.9 billion, an increase of £400 million year-over-year, but a far cry from the £20 billion seen in June of last year, as inflation has retreated from its excruciating highs. Martin Beck, the chief economic adviser for the EY Item Club, stated that economic output would determine the prognosis for borrowing in the coming year.

He stated, “The OBR’s GDP forecast for 2023-2024 appears too low. If this proves true, this year’s borrowing should be less than anticipated. However, the impact of a strengthened economy on short-term borrowing is likely to be temporary.”

Further down the road, the government’s fiscal policy flexibility will depend on whether the OBR can maintain its much more optimistic outlook on medium-term growth than the Bank of England.