October Marks Second Highest Post-Budget Borrowing Number in Last 28 Years
Public debt, excluding state ownership in banks, stood at 97.5 percent of GDP by the end of October.
Government borrowing increased to £17.4 billion in the last month, the second-highest October figure on record.
In October, public sector spending exceeded income by £1.6 billion compared to the same period last year, according to official data.
“This month’s borrowing was the second highest October figure since monthly records began in January 1993,” said Jessica Barnaby, the deputy director for public sector finances at the Office for National Statistics (ONS).
The ONS data, published on Thursday, provide the first reports on government borrowing post the October Budget, which included substantial spending measures.
Tax receipts also experienced growth, reaching £61.3 billion, driven by increases in corporation and income taxes along with slight growth in VAT receipts.
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“However, with spending on public services, benefits, and debt interest costs all increasing from last year, overall expenditure grew faster than revenue,” Barnaby noted.
Central government’s total expenditure in October reached £88.5 billion, marking a £3.9 billion increase compared to October 2023. The ONS mentioned that these current expenditure figures are provisional and will be further detailed as more information from government departments becomes available later in the year.
The rise in spending was driven by increased departmental spending on goods and services, day-to-day operations of local government, net social benefits paid, and interest payable on government debt.
Reviewing the government’s borrowing in the initial seven months of the fiscal year, the ONS reported a total of £96.6 billion spent.
“The strength in receipts compared to last year has offset a significant portion of the increased expenditure.”
Fiscal Headroom and Debt
October’s borrowing figures underscore the limited room the chancellor has for significant increases in day-to-day spending, according to Alex Kerr, economist at Capital Economics.
“Despite a substantial rise in day-to-day spending this year and next, spending is projected to grow by an average of only 1.3 percent in real terms between 2026–27 and 2029–30.
“Given the chancellor’s remaining fiscal headroom of just £9.9 billion against her fiscal mandate after the October Budget, it implies that if she wishes to further increase day-to-day spending, tax increases may be necessary,” he added.
The £9.9 billion fiscal headroom is significantly smaller compared to historical standards and roughly a third of the £28 billion average held by predecessors of Reeves since 2010.
The UK’s public debt, excluding state ownership in banks, was estimated at 97.5 percent of GDP at the end of the previous month. The ONS specified that the debt level is reminiscent of levels seen in the early 1960s.
Labour has vowed to reduce debt and stimulate growth through prioritized investments.
Chief Secretary to the Treasury Darren Jones mentioned, “This government will always maintain responsible control over public finances.”
However, government outflows are anticipated to remain high with the Budget expected to raise spending by £70 billion annually over the next five years.
The OBR predicts that two-thirds of this expenditure will focus on day-to-day spending and one-third on investments.
In her fiscal agenda, Reeves augmented taxation by approximately £40 billion annually, citing a “£22 billion deficit” inherited from the previous Conservative government as the rationale behind the measures.
The Director of the Centre for Policy Studies, Robert Colvile, warned that tax hikes could negatively impact investment confidence in Britain and send “a strong anti-growth signal to foreign investors.”
PA Media contributed to this report.
