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Government borrowing fell in May, although it still remains higher than pre-Covid levels

   News / 23 Jun 2022

Published: 23 June 2022
Location: London, UK

By Suzanne Evans, Director, Political Insight


The Office for National Statistics (ONS) says this morning that government borrowing fell in May, although it still remains higher than pre-Covid levels. Borrowing in the month was £14bn, down £4bn from a year earlier, but the third-highest May borrowing since monthly records began in 1993. Interest payments on this government debt jumped to a record £7.6 billion last month - £3.1bn higher than the year before – and 50% more than the £5.1bn forecast by the Office for Budget Responsibility. The increase is down to inflation driving up the cost of servicing the national debt; around one-quarter of the nation’s £2 trillion debt is linked to the retail price index measure of inflation, which surged to 11.7pc last month. Central government receipts were £66.6bn in May 2022, £5.7bn more than May 2021, with an annual increase of £3.4bn taken in taxes.
 
The ONS also released the latest UK house price data this morning, revealing that prices rose 12.4% to a new record high of £281,000 in April, marking a £31,000 increase on this time last year. In England, prices rose 11.9% over the year to £299,000; in Wales 16.2% to £212,000; in Scotland 16.2% to £188,000; and in Northern Ireland 10.4% to £165,000. Overall, house prices grew 1.1% between March and April. The pace of growth was the second highest – after April 2021 – in data going back to 2006.
 
Parliament's Treasury Select Committee (TSC) has created a sub-panel to make recommendations on new rules proposed by the Bank of England's Prudential Regulation Authority, and the Financial Conduct Authority, post-Brexit. The committee says it wants to ensure the benefits of reform outweigh any extra costs to for industry. Britain inherited the European Union's financial rules when it left the bloc, but now new handbooks are being written by the financial watchdogs. "Our approach will be targeted and flexible, with the new Sub-Committee devoted to the scrutiny of financial regulations and underpinned by a new and well-resourced unit of experts and specialists," said Mel Stride MP, who chairs the TSC and the new sub-committee.
 
The Treasury confirmed yesterday that it will continue selling down its stake in NatWest Group for another year, when it represents value for money to do so, and that it expects to return the bank into full private ownership by 2025-6. A total of 703.5m shares have been sold since August 2021, raising 1.6bn. The government does not expect to recoup the money paid to bail out the bank. It paid 502p per share for an 84% stake in the then Royal bank of Scotland during the 2007-9 financial crisis. This morning NatWest shares are trading at 224.8p. The government currently holds a 48.5% stake.
 
Members of the Rail, Maritime and Transport (RMT) union at Network Rail and 13 train operators have begun a second day of strikes. Just one in five trainsare running today, mostly on main lines. Around half of the network closed. Services started later than normal at 7.30am and will shut down early at 6.30pm. Meanwhile, government ministers have announced plans to change the law to enable businesses to supply skilled agency workers to plug staffing gaps during industrial action, something that is restricted under current trade union laws. Network Rail welcomed the move, but the Labour Party and trade unions condemned it as a “recipe for disaster”.
 
Teachers and Royal Mail workers are the latest to announce possible strike action. The National Education Union (NEU) says it will consult members in the autumn, "strongly encouraging them" to back industrial action if the government does not respond to its concerns over high workloads and pay in the next few months. Meanwhile, more than 115,000 post office workers who are members of the Communication Workers' Union (CWU) will be balloted from 28th June on whether to take industrial action over the company's 2% pay rise offer. The result will be announced on 19 July. Writing in the Daily Telegraph, Education Secretary Nadhim Zahawi denounced the possibility of teachers going on strike yesterday, saying it would be "unforgivable" and "irresponsible" in the wake of the disruption COVID-19 has caused to children's learning.
 
It emerged yesterday that not a single police officer investigated over the Rotherham grooming scandal lost their job. At least 1,400 girls were abused, trafficked and groomed in the city between 1997 and 2013. The Independent Office for Police Conduct(IOPC) spent eight years and £6 million on 93 investigations covering 265 allegations by 51 complainants, finding “a mountain of evidence detailing negligent, incompetent and unprofessional police work in handling sexual abuse of children,” according to the Daily Mail, which also reports that officers nevertheless either retired to escape punishment, or were allowed to carry on in their jobs.
 
Research by Barclays Bank and the debt charity StepChange has found that almost a third of shoppers who use buy now, pay later credit (BNPL) say repayments on the loans have become “unmanageable”. The average BNPL user’s outstanding balance currently stands at £254, the research found, as consumers now make an average of 4.8 purchases – almost double the 2.6 purchases in February – in this way. 30% of Britons have used BNPL to buy goods, and this form of lending is expected to account for almost a quarter of sales by retailers offering such schemes by the end of this year.
 
London's Heathrow Airport has raised its passenger number outlook, saying that thanks to stronger than expected demand, it now expects 54.4 million people to travel through the airport in 2022, as opposed to the 53 million it forecast last month. Heathrow also said its operating cost will rise by 47% to £1.22 billion, partly because of utilities costs due to higher energy prices.
 
JD Group, the owner of JD Sports, Blacks, Go Outdoors and Millets has now agreed to pay back more than £24m in government furlough support, saying a staycation boom fuelling a surge in sales of camping, cycling and outdoor gear at the company, helped it more than double profits last year. Total sales rose almost 40% to £8.6bn in the year to the end of January, while sales at Blacks, Millets and Go Outdoors jumped nearly 42% to £513.4m, helping the outdoor chains make a profit of £25.9m compared with a loss of £26.5m the year before. The group’s core sports fashion chains’ sales also soared nearly 40% as they opened hundreds more stores in the US and expanded online, Yahoo Finance UK reports. 30% of UK sales are now via the internet compared with 22% pre-pandemic.
 
Retailer Fraser Group said yesterday that it has increased its investment in fashion designer Hugo Boss, upping its stake to 3.42m shares of common stock, representing 4.9% of the company's total share capital; and 18.28m shares of common stock via the sale of put options - a further 26.0% of the group's total share capital. The FTSE 250-listed group noted that after considering the premium it will receive under the put options, its maximum aggregate exposure in connection with its acquired interests in Hugo Boss was approximately €900.0m (£770.m). "This investment reflects Frasers Group's belief in the Hugo Boss brand, strategy, and management team,” Frasers said.
 
Harrods has delayed its summer discount sale by two to three weeks because of global supply chain hold-ups, it has announced. “Our supply chain is running two to three weeks behind where it should be,” Michael Ward, the managing director of the upmarket Knightsbridge department store, told Bloomberg TV at the Qatar Economic Forum. “A good example of that is, we’ve just delayed the summer sale for two weeks because I need another 10% of new-season stock to allow me to function into the new year.” Ward also said the situation has been exacerbated by Brexit. “It’s almost impossible to find the right staff,” he said. “We’ve lost significant amounts of people as a result of Brexit. And it’s not the skilled or qualified, it’s the people we need to do jobs that unfortunately the British will not do.”
 
You have only 100 days to spend or redeem your paper £20 and £50 notes. They will no longer be legal tender from 30th September this year and will therefore lose all value. Some £14bn worth of these paper notes are known to still be in circulation.
 
Elon Musk says Tesla's new factories in Germany and the US are "losing billions of dollars" due to battery shortages and supply disruptions in China. "Both Berlin and Austin factories are gigantic money furnaces right now. It's really like a giant roaring sound, which is the sound of money on fire," Musk told the Silicon Valley Tesla Owners’ Club. The plants are "losing billions of dollars right now, he added, saying “there's a ton of expense and hardly any output". Musk has recently warned of job cuts at the firm.
 
US President Joe Biden asked Congress for a three-month pause on the federal gas tax yesterday, a proposal that would suspend 18.4 cents per gallon of gas and 24.4 cents for diesel in taxation drivers pay when they fill their tanks. In a speech from the White House, the president also encouraged states and local governments to suspend their gas taxes. However, USA Today says the proposal was met with widespread scepticism. House Speaker Nancy Pelosi, Senate Majority Leader Chuck Schumer and other top Democrats were noncommittal, the newspaper said, signalling it is unlikely to get essential Congressional approval.


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