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The British government borrowed more than expected in December, underscoring the challenge facing Chancellor Rachel Reeves as she tries to restore confidence in her budget plans and boost growth.
Borrowing – the difference between public sector spending and income – was 17.8 billion pounds last month, 10.1 billion pounds more than in December 2023 and the third highest since records began in December, according to data from the Office for National Statistics showed on Wednesday.
It was above the 14.1 billion pounds expected by economists polled by Reuters and above the 14.6 billion pounds that the Office for Budget Responsibility, Britain’s financial regulator, had forecast in its latest forecasts in October.
In the first nine months of the financial year, borrowing was £129.9bn, £8.9bn more than the same period in the previous financial year. It was also the second-highest borrowing in the April-December period since monthly records began in January 1993.
Jessica Barnaby, deputy director of public sector finance at the ONS, said that “spending on public services, welfare payments, interest on debt and capital transfers increased overall, while an increase in tax revenue was partly offset by a subsequent reduction in social security contributions.” The interest rate cuts will take place earlier in 2024.”
Reeves tried to reassure investors after Britain Loan costs this month has risen to its highest level since the global financial crisis, threatening its ability to comply with a self-imposed fiscal rule under which daily spending is covered by tax revenue.
Speaking after the release of December’s borrowing figures, Treasury Principal Secretary Darren Jones said: “Economic stability is critical to our ultimate mission of delivering growth. That is why our fiscal rules are non-negotiable and we will have an iron grip on public finances.”
The OBR, which must produce two forecasts each financial year, will provide an update on March 26 on whether Reeves is still on track to comply with her own lending rules.
Borrowing costs in the UK have fallen since figures showed inflation last week slowed unexpectedly in Decemberand the global bond sell-off eased.
But the government remains under pressure to turn around the economy, which grew just 0.1 percent in November after slight declines in September and October.
“While the bond market has calmed over the last week and fears of an emergency mini-Budget have subsided, the Chancellor will be keenly aware of the waste in the public finances as we look forward to the OBR’s economic and financial forecast, scheduled for March 26 “said Joe Nellis, economic advisor at MHA, the accounting and advisory firm.
Sterling remained 0.2 percent lower at $1.23 after the figures were released.
