UK Government Borrowing Rises to Highest Level for September in Five Years

Strategic Insights -

UK government borrowing saw a significant increase in September, reaching a five-year high for the month as debt interest payments and departmental spending continued to pressure the public finances. The Office for National Statistics revealed that public sector net borrowing, excluding public sector banks, stood at £20.2 billion, a £1.6 billion, or 8.6%, increase from the same period last year. This was a modestly higher figure than the consensus forecast of £20.5 billion but exceeded the Office for Budget Responsibility's March forecast of £20.1 billion.

Key Takeaways:

  • The UK government's public sector net borrowing rose to £20.2 billion in September, the highest level for that month in five years.
  • The increase was driven by higher debt interest payments, which jumped £3.8 billion to £9.7 billion, due to inflation-linked gilt payments, and increased central government spending, which rose £8.1 billion, or 9.8%, to £90.6 billion.
  • Tax receipts increased £3.6 billion to £63.1 billion, led by gains in income tax, value-added tax, and corporation tax, while social contributions grew by £3.2 billion following the April rise in employer National Insurance rates.
  • Public sector net debt, excluding public sector banks, was provisionally estimated at 95.3% of gross domestic product at the end of September, up one percentage point from a year earlier and near levels last seen in the early 1960s.
  • The central government net cash requirement, a measure of the cash needed to cover deficits, was £15.9 billion in September, nearly 20% higher than a year before.
  • The Office for National Statistics noted that this month's figures included a revision to VAT receipts following a correction announced by HM Revenue & Customs.

Statistics:

  • Public sector net borrowing rose by £1.6 billion, or 8.6%, to £20.2 billion in September.
  • The September borrowing figure was the highest for the month in five years.
  • For the financial year to September, borrowing totalled £99.8 billion, up £11.5 billion, or 13%, from the same period last year and the second-highest April-to-September total since monthly records began in 1993.
  • Debt interest costs jumped £3.8 billion to £9.7 billion in September.
  • Central government spending increased by £8.1 billion, or 9.8%, to £90.6 billion in September.
  • Tax receipts rose by £3.6 billion to £63.1 billion in September.
  • Social contributions grew by £3.2 billion in September.
  • Public sector net debt, excluding public sector banks, was provisionally estimated at 95.3% of gross domestic product at the end of September.
  • The central government net cash requirement was £15.9 billion in September.

Sources:

  • Office for National Statistics (ONS)
  • Office for Budget Responsibility (OBR)
  • HM Revenue & Customs
  • Alliance News
  • FXStreet