Home news UK government borrowing grows in October

UK government borrowing grows in October


UK public sector borrowing rose to £8.0bn in October, official figures show, up £500m from a year earlier.The figure comes a day before the Budget, and the monthly deficit was bigger than economists had predicted.Increased debt costs, linked to the UK’s higher inflation since the Brexit vote, were a factor in the shortfall.The Office for National Statistics (ONS) said borrowing for the financial year to date has fallen £4.1bn to £38.5bn, from the same month last year.That figure suggests borrowing is on track to come in below the Office for Budget Responsibility’s March forecast of £58.3bn for the financial year as a whole.Chancellor Philip Hammond will present the latest Budget on Wednesday. He has to balance calls for more government spending against the prospect of weaker future economic growth, which could affect tax revenues.John Hawksworth, chief economist at consultants PwC, said the chancellor faced “some tough choices in the Budget given a likely deterioration in the medium-term public borrowing outlook.””While we do expect some giveaways in the Budget on housing, health and some areas of public sector pay, we also expect these to be largely offset by clawbacks in other tax and spending areas.”Borrowing fallsGovernment borrowing has generally been falling since its £152.5bn peak in 2009. Last year it was about one third of that 2009/10 figure at £45.7bn, representing 2.3% of the size of the economy, or gross domestic product (GDP). One of the main reason for last month’s spike upwards was inflation, making it more expensive for the government to service its debts.The government does some of its borrowing by selling “index-linked gilts”, and the interest it pays on these is directly linked to the Retail Prices Index (RPI). Over the last year the RPI has doubled from 2% to 4%.The ONS said the £6bn debt interest paid by the government last month was the highest October interest payment on record.The government’s total debt has risen to nearly £1.8 trillion. But the figures have been skewed by the Bank of England and its quantitative easing programme. This has involved massive purchases of government bonds which have been taken on to the government books and now count as part of the overall debt figure.If these are taken out of the calculations then net debt stands at £1.6trn, almost exactly the same as this time last year.
Source: BBC