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According to official figures, UK government borrowing in September reached the highest level in five years, posing challenges for the chancellor in advance of next month’s Budget. The Office for National Statistics reported that borrowing, the difference between public spending and tax income, was £20.2bn in September, up £1.6bn from the previous year. The increase in debt interest payments offset the higher amount the government had collected through tax and national insurance.
Over the first six months of the financial year, borrowing has totaled £99.8bn, showing a rise of £11.5bn compared to the same period last year. The pressure on Chancellor Rachel Reeves is mounting as she is expected to raise taxes in the upcoming Budget to adhere to her own rules for government finances. Despite September’s figure being slightly lower than anticipated by analysts, it exceeded the government’s forecast of £20.1bn set by the Office for Budget Responsibility.
Capital Economics chief economist Paul Dales mentioned in an interview with the BBC that the chancellor would prefer tax receipts to be higher but that it hinges on faster economic growth. Capital Economics forecasts that the government will need to raise £27bn in the Budget, with the burden falling mainly on households through increased taxes. In preparation for the Budget, the government has introduced several measures to stimulate economic growth.
Even though tax income was higher in September compared to the previous year, spending also rose due to factors such as pay hikes, inflation, and increases in state benefits. The UK’s public sector debt is now estimated to be at 95.3% of the gross domestic product (GDP), reaching levels not seen since the early 1960s. Chief Secretary to the Treasury James Murray emphasized the government’s commitment to reducing borrowing, diverting funds from debt interest to essential services like the NHS, schools, and police. Shadow chancellor Mel Stride criticized the Labour government for failing to control borrowing effectively, placing the burden on future generations. Liberal Democrat Treasury spokeswoman Daisy Cooper warned that alarm bells should ring for the government ahead of the Budget, citing mistakes that have hindered economic growth
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