British public borrowing in the first six months of the tax year came in higher than forecasts estimated by the Office for Budget Responsibility (OBR), which produces the projections that underpin Government budgets.
Public borrowing – the difference between public sector spending and income – was £16.6bn in September 2024. This is £2.1bn more than in September 2023 and the third highest September borrowing since monthly records began in January 1993.
In the financial year to September 2024, the amount of borrowing stood at £79.6bn, £1.2bn more than at the same point in the last financial year and the third highest year-to-September borrowing since monthly records began in January 1993.
Public sector net debt excluding public sector banks was provisionally estimated at 98.5% of gross domestic product (GDP) at the end of September 2024; this was 4 percentage points more than at the end of September 2023 and remains at levels last seen in the early 1960s.
The figures highlight the scale of the public finances challenge facing Chancellor Rachel Reeves ahead of the Budget next week.
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The vast majority (£9.7bn) of central Government overspending in the current financial year comes from spending on goods and services, typically higher pay and running costs. The scale of this overspending tallies with the £22bn ‘black hole’ identified by the Treasury back in July.
But while those day-to-day spending pressures continue to build, the impact on borrowing was partly offset by lower benefit payments reflecting cuts to Winter Fuel Payments which are recorded in September, when eligibility is determined, rather than in November when they’re paid.
Tax receipts have also come in £4.9bn above the OBR’s estimates in the six months to September. Along with higher-than-expected debt interest, overall public sector borrowing was £6.7bn higher than the OBR’s forecast at the time of the Budget in March.
Cara Pacitti, senior economist at the Resolution Foundation, said: “Six months into the financial year, Britain is borrowing £6.7bn more than expected at the time of the Budget in March. This reflects central Government spending which is £11.5bn higher than anticipated, largely due to public sector pay rises and higher running costs.
“Today’s data highlights the scale of the public finances challenges facing the Chancellor as she grapples with overspending today, the need to avoid austerity in the future, and having to fund extra public service spending through tax rises.”
‘This Budget will be full of difficult decisions’
Danni Hewson, AJ Bell head of financial analysis, said: “If Government finances were following the script of a Disney musical the last print before the new Chancellor’s Budget would have discovered a pot of cash nestled under a magic money tree bathed in the light of a rainbow. But from the start the new Labour Government hasn’t pulled its punches, warning us all that this Budget will be full of difficult decisions.
“Of course, some of those difficulties are of their own making. Though delivering chunky pay rises to public sector workers did end financially damaging strikes, it has left Rachel Reeves with a bigger hole to plug than she might otherwise have been dealing with.”
Hewson added: “Economic growth has helped boost tax receipts, but not by enough to compensate for increased wage and benefits bills, decreased National insurance payments and £5.6bn interest on all that inherited debt.”
“If this Budget is going to ‘fix the foundations’ as ministers have briefed, then a number of those tax increases that have made it into newspaper print over the last few weeks will have to make it into the chancellor’s final draft.
“How Rachel Reeves sells it to us is going to be crucial. She needs to bring businesses and the household consumer with her on this journey if growth is going to reach meaningful enough levels to balance the books, which at the moment are heavily weighted against her.”