Britain's government appears to be on course to borrow less this fiscal year than was predicted only two months ago, but rising inflation could soon curb any leeway for finance minister Rishi Sunak ahead of his March budget update, according to figures released on Tuesday.
The ONS reported that public sector net borrowing, excluding state banks, totalled 16.848 billion pounds ($22.71 billion) in December.
So far in the 2021/22 fiscal year, which runs from April to December, Britain has borrowed 146.8 billion pounds, which is 129.3 billion pounds less than at the same stage in the 2020/21 fiscal year, when the COVID-19 crisis was at its worst.
Borrowing for the 2021/22 fiscal year, which runs from April to December, is now running nearly 13 billion pounds lower than the Office for Budget Responsibility had predicted at this point, at 146.8 billion pounds.
According to the ONS, this included a 6 billion-pound downward revision to borrowing up until November. However, the figures also indicated an increasing cost to the public finances from inflation, which reached a 30-year high last month.
Debt interest payments reached 8.1 billion pounds last month, reflecting a strong increase in retail price inflation, the peg for inflation-linked British government bonds, which account for around one-third of the total.
"Surging inflation is making Sunak's goal of returning the public finances to a sustainable footing considerably more difficult," Pantheon Macroeconomics economist Samuel Tombs said.
Finance minister Rishi Sunak responded to the data by saying "risks to the public finances, including inflation, make it even more critical that we avoid burdening future generations with high debt repayment."
"Our fiscal rules mean we will lower our debt burden while continuing to invest in the UK's future."