TL;DR
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Government borrowing for October reached £17.43bn, exceeding expectations and marking the third-highest level since 1993, amid tight consumer spending.
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Retail sales contracted by 1.1%, indicating reduced household consumption as consumers withhold spending in anticipation of future deals.
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The Chancellor‘s fiscal plans face pressure as the borrowing overshot projections, with tax rises expected in the upcoming budget announcement.
Government borrowing third-highest record in October as people not spending – official figures | Money News
Government borrowing was higher than expected and consumers tightened their belts, spending less than anticipated, official figures show.
Government borrowing rose to the third-highest October level since records began in 1993, though less than a year ago, according to the Office for National Statistics (ONS).
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It’s the last assessment of public finances we’ll get before Chancellor Rachel Reeves makes her budget announcement next week. It showed spending on benefits and public services was up, which was offset by higher tax takes.
Expensive borrowing
Billions were spent on borrowing money last month, with interest payments costing central government £8.4bn.
Reacting to the figures, the chancellor’s deputy, James Murray, said, “Currently we spend £1 in every £10 of taxpayer money on the interest of our national debt.
“That money should be going to our schools, hospitals, police and armed forces. That is why we are set to deliver the largest primary deficit reduction in both the G7 and G20 over the next five years – to get borrowing costs down.”
While the numbers won’t have a direct effect on the budget, with figures already submitted, it illustrates the difficult backdrop facing the chancellor, who’s committed to maintaining her self-imposed fiscal rules to bring down government debt and balance the budget by 2030.
It’s unwelcome news for Ms Reeves.
“There was little good news for the chancellor in this morning’s public finances release, with October borrowing in isolation running ahead of the [Office of Budget Responsibility] OBR’s projections by £3.1bn, the second-highest overshoot so far in this fiscal year,” said Pantheon Macroeconomics’ senior UK economist Elliott Jordan-Doak.
“Borrowing has now overshot the fiscal watchdog’s projections in four of the seven months so far this fiscal year”.
As a result of the fiscal bind, tax rises are widely expected to be announced next week.
Public sector net borrowing reached £17.43bn, above the £15bn forecast by economists polled by Reuters.
A slowdown in sales
Retail sales – how much people are spending – shrank 1.1% in the half-term month too. No growth had been expected, rather than a contraction.
This matters as retail sales figures measure household consumption, the largest expenditure in the UK Economy.
Consumers were holding back for Black Friday deals, retailers told the ONS.
Along with weakened levels of consumer sentiment, the data paints a picture of worry about the impact of the budget.
The long-running GfK consumer confidence index dropped this month, suggesting the public is waiting for difficult news.