UK borrows more than expected in December

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The UK government borrowed more than expected in December, underlining the challenges facing Chancellor Rachel Reeves as she tries to restore confidence in her fiscal plan and kick-start growth.

Borrowing — the difference between public sector spending and income — was £17.8bn last month, £10.1bn more than in December 2023 and the third highest of any December on record, data from the Office for National Statistics showed on Wednesday.

That was above the £14.1 billion expected by economists polled by Reuters and the £14.6 billion forecast by the Office for Budget Responsibility, the UK fiscal watchdog, in its most recent set of estimates in October.

In the first nine months of the financial year, borrowing was £129.9bn, up £8.9bn on the same period in the previous financial year. It was 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 “government services, benefits, debt interest and capital transfers all increased, while increases in tax receipts were partly offset by a fall in National Insurance contributions, following rate cuts in early 2024”.

Reeves tried to reassure investors after the UK Borrowing cost this month climbed to the highest level since the global financial crisis, threatening its ability to meet a self-imposed fiscal rule in which day-to-day spending is covered by tax receipts.

After the December debt figures were released, Treasury Chief Secretary Darren Jones said: “Economic stability is vital to our number one growth mission, that’s why our fiscal rules are non-negotiable and why we will have an iron grip. on public money.”

The OBR, which is required to produce two forecasts each financial year, will provide an update on March 26 on whether Reeves is still on track to meet its own borrowing rules.

UK borrowing costs have fallen since last week’s figures showed inflation Unexpectedly slow in DecemberAnd a global bond sell off.

But the government is under pressure to turn around the economy, which grew just 0.1 percent in November after mild contractions in September and October.

“While bond markets have calmed over the past week and fears of an emergency mini-budget have eased, the Chancellor will be very mindful of the waste of government money as we head into the OBR’s economic and fiscal forecast due for March 26.” said Joe Nellis, MHA’s economic adviser, accountancy and advisory firm.

Sterling was 0.2 percent lower at $1.23 after the data was released.