The UK borrows more than expected in December

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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 stimulate growth.

Borrowing – the difference between public sector spending and income – reached £17.8 billion last month, £10.1 billion more than in December 2023, and the third highest December level on record, data from the Office for National Statistics showed on Wednesday.

It was higher than the £14.1 billion expected by economists polled by Reuters, and the £14.6 billion expected by the Office for Budget Responsibility, the UK’s financial watchdog, in its latest set of forecasts issued in October.

In the first nine months of the financial year, borrowing amounted to £129.9 billion, which was £8.9 billion more than in the same period of the previous financial 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 Office for National Statistics, said: “Spending on public services, benefits, debt interest and capital transfers all rose, while the increase in tax revenues was partly offset by lower National Insurance contributions, following interest rate cuts in Earlier than 2024.”

Reeves sought to reassure investors after the UK Borrowing costs this month It has jumped to the highest level since the global financial crisis, threatening its ability to meet a self-imposed fiscal rule under which daily spending is covered by tax revenues.

After the December borrowing figures were published, Darren Jones, chief secretary to the Treasury, said: “Economic stability is vital to our first mission of delivering growth, which is why our fiscal rules are non-negotiable, and why we will have an iron fist.” on public finances.”

UK borrowing costs have fallen since figures last week showed inflation It slowed unexpectedly in DecemberGlobal bond sales declined.

But the government remains under pressure to turn around an economy that grew by just 0.1 percent in November after a slight contraction in September and October.

“As the bond market calmed last week and concerns about an emergency mini-budget subside, the Chancellor will be keenly aware of the squandering of government finances as we head towards the OBR’s economic and fiscal forecasts due on 26 March.” said Joe Nellis, economic consultant at accounting and consulting firm MHA.