Belfast Telegraph

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.

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.

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UK public sector net borrowing in October 2007-17

“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.

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