UK Budget Deficit Overshoots Estimate

The UK government borrowing exceeded expectations and also hit the second highest level on record for the month of October, but the borrowing so far this financial year was less than the official projection, giving room for maneuver in the autumn statement.

Public sector net borrowing excluding banks increased by GBP 4.4 billion to GBP 14.9 billion in October, the Office for National Statistics reported Tuesday. This was the second biggest October borrowing since monthly records began in 1993.

Interest payable hit the highest for any October since records started in April 1997, the ONS said.

Central government debt interest payables grew GBP 1.1 billion from the last year to GBP 7.5 billion and also exceeded the Office for Budget Responsibility’s estimate of GBP 4.9 billion.

At the same time, receipts increased by GBP 2.5 billion to GBP 76.9 billion, which was also above the GBP 75.4 billion forecast by the OBR in March.

In the financial year-to-October, PSNB excluding banks was GBP 98.3 billion, which was GBP 21.9 billion more than in the same period last year. However, borrowing was still GBP 16.9 billion less than the OBR forecast of GBP 115.2 billion.

“With the election drawing nearer, the Chancellor surely won’t be able to resist the temptation to unveil a pre-election splash”, said Capital Economics’ economist Ruth Gregory said.

Chancellor Jeremy Hunt is set to unveil a net fiscal giveaway averaging about GBP 12 billion or 0.5 percent of GDP per annum, Gregory noted.

In a speech on Monday, Prime Minister Rishi Sunak suggested personal tax cuts in the Autumn Statement on Wednesday.

The Institute for Fiscal Studies reportedly warned that the government can only afford “a tiny tax cut”.

The ONS data showed that public sector net debt came in at around 97.8 percent of GDP at the end of October.

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