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UK Borrowing Surges, Adding Pressure on Chancellor Ahead of Budget
Confirmed
In Short: The UK government's borrowing in August was £18.3 billion, nearly 20% higher than the previous year, putting pressure on Chancellor John Healey ahead of his Budget announcement.
The UK government's borrowing in August was £18.3 billion, nearly 20% higher than the previous year, according to the Office for National Statistics (ONS). This borrowing surge is more than official forecasters expected, adding pressure on Chancellor John Healey as he prepares to deliver his first Budget on 28 October.
Ruth Gregory, deputy chief UK economist at Capital Economics, said the backdrop for the autumn Budget is 'dismal,' with the government borrowing more than expected. She warned that with the economy weakening, borrowing is likely to continue to exceed forecasts.
The Institute for Fiscal Studies (IFS) noted that spending on debt interest is a 'worryingly large share' of overall government spending, pushed up since the last official forecasts from the Office for Budget Responsibility (OBR).
Conservative shadow chancellor Andrew Griffith criticized the Labour government for 'losing control of the public finances' by overshooting OBR forecasts. He added that the chancellor's problems persist even there.
Professor Edward Jones at Bangor University told The i Paper that 'further fiscal tightening'—tax rises or spending cuts—is increasingly likely in Healey’s Budget. Jones estimated that Healey may have to find between £10 billion to £15 billion to restore fiscal headroom back to around £24 billion to reassure bond markets.
Economists warned that while Andy Burnham’s plan to send powers and cash around the country may boost economic growth in the long-term, Healey is likely to have to raise taxes in next month’s Budget to maintain credibility with the markets.
In his first major speech since taking over at the Treasury, Mr Healey acknowledged the pressure from high government borrowing costs and pledged to tackle the growing burden on businesses, while striking an optimistic tone on the economic outlook despite global crises including the war in the Middle East and Russia’s invasion of Ukraine.
Healey’s speech on Monday is designed to set the stage for the Budget—a key moment for Burnham’s nascent Government—on 28 October. The Chancellor will look to take on these concerns by promising to balance the books, while saying Burnham’s plans for devolution and more public control will work hand-in-hand with business.
What this adds
The surge in borrowing costs and the need for fiscal tightening add complexity to Healey's upcoming Budget. The pressure to balance the books while addressing regional growth and economic challenges is significant.
What's confirmed
- The UK government's borrowing in August was £18.3 billion, nearly 20% higher than the previous year, according to the Office for National Statistics (ONS). This borrowing surge is more than official forecasters expected, adding pressure on Chancellor John Healey as he prepares to deliver his first Budget on 28 October.
- Ruth Gregory, deputy chief UK economist at Capital Economics, said the backdrop for the autumn Budget is 'dismal,' with the government borrowing more than expected. She warned that with the economy weakening, borrowing is likely to continue to exceed forecasts.
- The Institute for Fiscal Studies (IFS) noted that spending on debt interest is a 'worryingly large share' of overall government spending, pushed up since the last official forecasts from the Office for Budget Responsibility (OBR).
- Conservative shadow chancellor Andrew Griffith criticized the Labour government for 'losing control of the public finances' by overshooting OBR forecasts. He added that the chancellor's problems persist even there.
- Professor Edward Jones at Bangor University told The i Paper that 'further fiscal tightening'—tax rises or spending cuts—is increasingly likely in Healey’s Budget. Jones estimated that Healey may have to find between £10 billion to £15 billion to restore fiscal headroom back to around £24 billion to reassure bond markets.
- Economists warned that while Andy Burnham’s plan to send powers and cash around the country may boost economic growth in the long-term, Healey is likely to have to raise taxes in next month’s Budget to maintain credibility with the markets.
- In his first major speech since taking over at the Treasury, Mr Healey acknowledged the pressure from high government borrowing costs and pledged to tackle the growing burden on businesses, while striking an optimistic tone on the economic outlook despite global crises including the war in the Middle East and Russia’s invasion of Ukraine.
- Healey’s speech on Monday is designed to set the stage for the Budget—a key moment for Burnham’s nascent Government—on 28 October. The Chancellor will look to take on these concerns by promising to balance the books, while saying Burnham’s plans for devolution and more public control will work hand-in-hand with business.
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- Reform Treasury spokesman Robert Jenrick said that “even Rachel Reeves had more vision than this guff”, while claiming that that “taxes on working people will inevitably rise at the budget” because Healey “won’t cut the ballooning benefits bill, foreign aid, or net zero subsidies”.
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- “To controlling borrowing to bear down on inflation and reducing long-term pressures on our public finances.” The pound was quoted at 1.3516 dollars at the time of the London equities close on Monday, down from 1.3522 dollars at the time of the London equities close on Friday.
- The Prime Minister also noted that bringing forward the budget submission date should help reduce speculation about future fiscal measures.