Government borrowing in the UK has surged beyond forecasts, reaching a higher-than-expected £17.4 billion in October. This increase has been attributed to a rise in debt interest and recent public sector pay hikes. The Office for National Statistics (ONS) reported that public sector net borrowing was £1.6 billion higher compared to the same month the previous year. This surge in borrowing comes in the aftermath of significant spending measures announced in the autumn Budget.
Economists had projected borrowing to be at £13.3 billion for October, making the actual figure a notable deviation. Central government debt interest climbed to £9.1 billion for the month, the highest October amount on record, exceeding last year’s figure by £0.5 billion. Jessica Barnaby, the ONS deputy director for public sector finances, stated, “This month’s borrowing was the second highest October figure since monthly records began in January 1993.”
The increase in central government departmental spending on goods and services to £36.9 billion in October was primarily driven by pay rises and the escalating running costs due to inflation. This rise in expenditure includes the impact of pay increases for NHS staff and teachers announced after the Labour Government assumed office. Total central government spending was £88.5 billion in October 2024, marking a £3.9 billion rise from the same period in the previous year.
On the revenue side, central government receipts saw a boost amounting to £81.2 billion for the month, reflecting an increase of £2.9 billion. This uptick was supported by higher corporation tax and income tax payments. Overall, public sector net borrowing stood at £96.6 billion for the financial year up to October, based on the latest data. The public debt, excluding state ownership in banks, was estimated to be 97.5% of GDP at the end of October.
Chief Secretary to the Treasury, Darren Jones, affirmed the government’s commitment to maintaining financial stability through robust fiscal rules aimed at reducing debt while prioritising investments for growth. These measures are crucial to navigate the challenges posed by the current economic landscape.
The current borrowing trend underscores the fiscal challenges faced by the UK government as it balances the need for economic stimulus and growth against the imperative to manage public finances responsibly. The ongoing impacts of the pandemic, coupled with evolving economic conditions, are likely to shape future policy decisions around government borrowing and expenditure.
As the government grapples with the economic repercussions of the pandemic, striking a balance between supporting recovery initiatives and maintaining fiscal discipline remains a critical challenge. The trajectory of government borrowing will continue to be closely monitored as policymakers navigate the complexities of the post-pandemic economic landscape.