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The UK government borrowed more than expected in December, highlighting the challenge facing Chancellor Rachel Reeves as she tries to restore confidence in her fiscal plans and jump-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, figures 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, Britain's fiscal watchdog, in its latest set of projections from October.
In the first nine months of the fiscal year, loans totaled £129.9 billion, which was £8.9 billion more than in the same period of the previous fiscal 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 “spending on public services, benefits, debt interest and capital transfers rose, while increases in tax receipts were partly offset by reductions in National Insurance contributions. rates will be cut earlier in 2024”.
Reeves sought to reassure investors across the UK borrowing costs this month has climbed to its highest level since the global financial crisis, threatening its ability to meet its self-imposed fiscal rule in which day-to-day spending is covered by tax revenue.
Following the release of December's borrowing figures, Darren Jones, chief secretary to the Treasury, said: “Economic stability is vital to our number one mission of delivering growth, that's why our fiscal rules are non-negotiable and that's why we're going to 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 meet its own lending rules.
Britain's borrowing costs eased as last week's data showed inflation unexpectedly slowed down in Decemberand the global bond selloff eased.
But the government remains under pressure to turn around the economy, which grew just 0.1 percent in November after modest contractions in September and October.
“While the bond market has calmed down in the last week and fears over the emergency mini-budget have subsided, the Chancellor will be very aware of the loss of government finances as we head towards the OBR's economic and fiscal forecast due on the 26th,” said Joe Nellis, economic adviser to MHA , accounting and consulting firms.
Sterling remained 0.2 percent lower at $1.23 after the data release.
