LONDON (AFP) – United Kingdom (UK) public borrowing rose more than expected in September, official data showed yesterday, as the new Labour government prepares for its first budget next week that is expected to include tax rises.
Public sector borrowing stood at GBP16.6 billion (USD21.5 billion) last month, up GBP2.1 billion from September 2023, the Office for National Statistics (ONS) said in a statement.
It marked the third highest September borrowing figure since records began, the ONS added.
The figure was GBP1.5 billion higher than the amount expected by government watchdog the Office for Budget Responsibility.
However, it came in lower than the amount forecast by economists.
Prime Minister Keir Starmer has warned Britons that the budget announcement on October 30 will be “painful”, with spending cuts also expected.
Government finances last month suffered from “increased spending, partly due to higher debt interest and public sector pay rises”, said ONS deputy director for public sector finances Jessica Barnaby.
Yesterday’s data also showed total state debt at 98.5 per cent of UK gross domestic product, remaining at levels last seen in the 1960s.
The ONS added that net social benefits decreased by GBP2 billion last month, partly owing to a controversial Labour policy to reduce spending on winter fuel payments for pensioners.
Finance Minister Rachel Reeves has pledged to impose “iron discipline” over public finances to claw back what she says is a GBP22-billion black hole inherited from the previous Conservative government.
Labour won a landslide election in early July, ending 14 years of Tory rule. “Resolving this black hole at the budget next week will require difficult decisions to fix the foundations of our economy,” senior Treasury official Darren Jones said in a statement following yesterday’s data.
Labour has pledged not to hike taxes on “working people”, which would appear to rule out raising income tax, other social security and VAT rates.
But there is growing speculation that other taxes, like capital gains, could be targeted.
“Although Rachel Reeves has promised that the UK will not see a return to austerity, a series of tax increases in one form or another are all but guaranteed at next week’s budget,” said strategist at Quilter Investors Lindsay James.
The government, however, has been boosted by some positive data over the past month.
The UK economy bounced back in August after two months of stagnation and inflation has fallen below the Bank of England’s (BoE) two per cent target.
These figures have added to analysts expectations that the BoE will cut its key interest rate in November, easing the burden on borrowers.
