UK government has recorded a much larger budget deficit than expected in October, according to the first borrowing figures since finance minister Philip Hammond promised an end to austerity was within sight.
The deficit in October rose to £8.820bn from £7.235bn a year earlier, the Office for National Statistics (ONS) said. This is the highest October borrowing for three years.
Yael Selfin, Chief Economist at KPMG UK, commented: “October’s data paints a difficult picture for the Chancellor, with cumulative public sector net borrowing estimated to already stand at £26.7 billion, higher than the £25.5 billion total borrowing the OBR expected for the full fiscal year.
“Higher VAT receipts, as well as higher takings from income tax and tobacco duties, helped boost government coffers, offset by a smaller earnings transfer from the Bank of England. Government spending was up primarily on day to day expenditure, including social benefits, while the rise in net investment was smaller, albeit from a lower base. Given past spending patterns, we now expect total borrowing for the full fiscal year of 2018-19 to come to £28.1 billion, or £2.6 billion above the OBR October forecast. This increase in the deficit eats into the projected room that the Chancellor saved in case of a damaging Brexit outcome, which we estimate is now diminished to £12.8 billion.”
The ONS cited “notable” growth in expenditure on goods and services, as well as social benefits. Interest payments on government debt also increased.
Still, for the first seven months of the 2018/19 financial year, the deficit stood at 26.7 billion pounds, down almost 30 percent on the previous year and the lowest at this stage of the financial year in 13 years.