The UK’s September budget deficit was lower than anticipated, which is a tiny relief for Jeremy Hunt, the finance minister, as he struggles with severe economic limitations in preparation for a budget report next month.
The UK’s Office for National Statistics (ONS) stated on Friday that the public sector’s net borrowing in September was 14.347 billion pounds, excluding borrowing from state-owned banks.
A Reuters survey of economists suggested that the public sector’s net borrowing would be 18.3 billion pounds, excluding loans from state-owned banks.
In the very first half of the 2023–24 fiscal year, from April to September, the government borrowed a total of 81.7 billions pounds, 15.3 billion pound exceeding the amount borrowed in the corresponding period the year before.
However, spending is still running roughly 20 billion pounds below what the Office for Budgetary Responsibility had predicted at this stage in March with only half of the year’s budget completed.
According to the research tank Resolution Foundation, rising inflation increased the nominal amount of the government’s revenue from taxes, which appeared to be a short-term financial benefit for Hunt before the budget’s update on November 22.
However, as the impact of higher rates of interest continues to drive up the cost of borrowing over the next years, “this short-term advantage is likely to be far outweighed by longer-term pain,” said Cara Pacitti, chief economics at the Resolutions Foundation.
Hunt has all but ruled out any near-term tax cuts, stating that the government should prioritize bringing down inflation. He stated last week that higher interest rates will likely cost Britain an additional 20 to 30 billion pounds annually.
According to data released on Friday, debt interest rates fell significantly in September alone as a result of a decline in the retail prices index, which serves as the baseline for inflation-linked government bonds.
Hunt did stress the fact that credit card interest expenses had risen last year in his reaction to the statistics, though. The state of the economy continues to worry policymakers. Retail sales volumes fell significantly in September, according to separate ONS statistics released on Friday, while the GfK index of confidence among consumers also fell.