Blow for Chancellor Philip Hammond as public finances unexpectedly worsen
The Office for National Statistics said public sector net borrowing jumped by £500 million to £8 billion in October.
The UK’s public finances unexpectedly worsened last month, piling further pressure on Chancellor Philip Hammond who is facing a potential growth downgrade in the Autumn Budget.
The Office for National Statistics (ONS) said public sector net borrowing, stripping out state-owned banks, jumped by £500 million to £8 billion in October.
The move was above economists’ predictions of £7.5 billion, as debt interest payments hit a record high for the month at £6 billion.
Despite last month’s rise, the deficit excluding state-backed banks for the current financial year – April to October – hit its lowest level for a decade, dropping £4.1 billion to £38.5 billion.
£38.5 bn public sector net borrowing excluding public sector banks Apr-Oct 2017, lowest year-to-date since 2007 https://t.co/yqy2GBRrrZ— ONS (@ONS) November 21, 2017
The update comes as Mr Hammond braces for the prospect of a gloomy fiscal outlook in Wednesday’s Budget, with forecasts expected to show lower economic growth and higher borrowing.
Samuel Tombs, Pantheon Macroeconomics chief UK economist, said: “Public borrowing rose year-over-year in October, despite ongoing austerity measures, primarily because interest payments leapt by £1.2 billion.
“Interest payments on index-linked gilts jumped, due to the rise in inflation.
“Public sector investment also rose £0.5 billion year-over-year, following weakness earlier this year.
“By contrast, year-over-year growth in tax receipts increased to 5.4% in October, from 4.6% in September and exceeded the OBR’s 2.7% full-year expectation.”
Sterling showed little reaction to the announcement, up marginally against the US dollar at 1.323 and rising 0.1% versus the euro at 1.128.