UK government borrowing in October exceeded expectations, with a figure of £14.9bn, largely driven up by higher benefit payments. The smaller-than-expected deficit through the financial year’s first half was due to higher tax receipts in previous months, as inflation and wages rose, leading some economists to predict Chancellor Philip Hammond may announce tax cuts in Wednesday’s Autumn Statement. The deficit across the whole financial year is expected to meet Hammond’s self-imposed rules on borrowing, with around £20bn to spare.
Spending on cost of living payments and higher interest on public debt contributed to the largest October shortfall in public finances since records began. Borrowing was up £4.4bn from the previous year to the second highest October figure on record. The figure was also higher than the forecast £13.7bn made by the UK Office for Budget Responsibility (OBR). Overall, the government had borrowed £98.3bn since the beginning of the financial year, £21.9bn more than the previous year, but less than the £115.2bn forecast by the OBR in March.
The data presents Chancellor Hammond with a mixed set of numbers as he prepares for his budget on Wednesday, November 22. Some analysts believe that Hammond will bargain on a small surplus once he meets self-imposed borrowing rules, leaving some net fiscal headroom and paving the way for possible tax cuts. However, others believe that he might prioritize the creation of business opportunities over the granting of tax concessions.
Responding to the figures, Chancellor Hammond said that he would continue to support the Bank of England’s efforts to drive down inflation to 2%. He added that this meant being responsible with the UK’s finances
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