Government Borrowing Rises Ahead of Autumn Statement Announcements

Government borrowing increases in anticipation of Autumn Statement announcements

November 21, 2023 TruthUSA

Economists are indicating that the Chancellor is “under greater pressure than ever to come up with something” to gain popularity points through tax cut announcements.

Official data revealed that government borrowing had increased to £14.9 billion, marking the second-highest October borrowing since monthly records started in 1993.

This amount is £4.4 billion more than was borrowed in the same month the previous year, according to the Office of National Statistics (ONS).

The figure was £1.2 billion higher when compared to the forecast by the Office for Budget Responsibility (OBR) for October, representing the first time it has overshot the official forecast this financial year.

Public sector net borrowing for the first six months of the financial year stood at £83.4 billion, in contrast to the previously estimated £81.7 billion published in September. This difference can be attributed to reduced tax and national insurance contributions, as well as weaker income taxes.

Government debt reached £2,643.7 billion or 97.8 percent of GDP, which is 2.3 percent higher than a year ago, maintaining levels last seen in the early 1960s.

“With the government still lagging far behind in the opinion polls and an election required before the end of January 2025, the chancellor, Jeremy Hunt, is under more pressure than ever to come up with something at the Autumn Statement on Wednesday, Nov. 22,” stated Capital Economics economists.

Wiggle Room

Even though Downing Street will be pleased that borrowing over the financial year-to-date was lower than the OBR forecast, it will still face constraints in how much it can offer in terms of tax cuts.

The Institute for Fiscal Studies (IFS) has previously indicated that the government is “in no position to offer fiscal giveaways,” given the very high spending on debt interest.

The IFS cited weak growth and inflationary risks as major obstacles to making decisions about tax cuts.

Both Mr. Hunt and Prime Minister Rishi Sunak, however, have stated that the goal of halving inflation by the end of the year has been achieved.

Inflation decreased to 4.7 percent in the year to October, down from 6.3 percent in September.

“Now that inflation is halved, we can turn our attention to cutting tax,” the prime minister said on Monday.

The government is aiming to “reward work, by cutting taxes and reforming the benefits system so work always pays,” pledged Mr. Sunak.

Among the prime minister’s long-term economic priorities is reducing national debt, which is expected to keep inflation falling and mortgage rates at affordable levels.

The governor of the Bank of England, however, stated that it was too soon to discuss overcoming inflation and reducing interest rates.

“We still have a long way to go. Interest rates will have to stay high enough for long enough to make sure we get all the way back to the 2 percent target,” said Andrew Bailey.

As the chancellor finalizes Wednesday’s Autumn Statement, he will have to carefully weigh the economic and political costs of tax cuts.

The Conservatives are trailing behind the opposition Labour Party in opinion polls. The latest YouGov/Times voting intention poll shows the Conservatives on 21 percent of the vote, compared to Labour’s 44 percent.

While tax announcements could win votes for the Tories, they may not be economically beneficial considering the increasing national debt and high-interest rates.

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