UK public borrowing comes in much higher than expected in October

The Office for National Statistics reported that borrowing in the month was £8.82bn, well ahead of the £6.15bn projected by City of London analysts

Public borrowing came in higher than expected in October, in the first set of official public finance figures since Philip Hammond’s “end to austerity” Budget.

The Office for National Statistics reported that borrowing in the month was £8.82bn, well ahead of the £6.15bn projected by City of London analysts. It was also higher than the £7.2bn of borrowing in the same month of 2017.

Total tax receipts were up just 1.2 per cent on the same month a year earlier, but current government spending jumped by 6.6 per cent.

However, the ONS revised its estimate for borrowing for September down to £2.84bn, from a previous estimate of £4.12bn.

Total borrowing for the seven months of the 2018-19 financial year to date is £26.7bn, 30 per cent lower than the £37.9bn at the same stage in 2017-18.

At October’s Budget, the Office for Budget Responsibility projected borrowing for the full year to finally come in at just £25.5bn, before rising to £31.8bn in 2019-20 due to higher health spending and income tax cuts.

The latest figures suggest that the 2018-19 target could be overshot by around £3bn.

“This could be a worrying sign for the Chancellor,” said Capital Economics’s Andrew Wishart.

“If this trend continues, the giveaways in the October Budget could see him breach his near-term fiscal targets. And if there is a no deal Brexit, the resulting economic slowdown would probably cause the public finances to deteriorate further.

In the Budget the Chancellor, Philip Hammond, told MPs that “the era of austerity [is] finally coming to an end”, as he used all his windfall from lower projected borrowing over the coming years to increase spending and to fund tax cuts.

“For the moment, the positive revisions to past data mean that the OBR’s improved forecasts for public borrowing this year remain on track. But if recent trends in the economy continue, public borrowing could end up being higher than the OBR projected in future years, reducing the Chancellor’s room for manoeuvre in his Spending Review next year,” said John Hawksworth of PwC.

“As with much else about the economy at present, a lot depends on whether a deal can be agreed to ensure a reasonably smooth Brexit.”