Government borrowing exceeded expectations last month, according to new figures, as ministers pledged to crack down on government "waste".
Data from the Office for National Statistics (ONS) revealed that the government borrowed £17.8bn in December, significantly more than the £14.6bn forecast by the Office for Budget Responsibility (OBR), as reported by .
This marked the third highest December figure on record, trailing only 2009 and 2020, and the highest in four years. "Compared with December 2023, spending on public services, benefits, debt interest and capital transfers were all up, while an increase in tax receipts was partially offset by a reduction in National Insurance contributions, following the rate cuts earlier in 2024," said Jessica Barnaby, ONS Deputy Director for Public Sector Finances.
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The interest payable on central government debt reached £8.3bn in December, nearly £4bn higher than the previous year and the third highest December figure since January 1997. This figure does not account for January’s surge in gilt yields.
In the first nine months of the financial year, government borrowing has totalled £129.9bn, surpassing the OBR’s forecasts for the same period by £4.1bn. This places borrowing in the year-to-date at its second highest level since records began in 1993.
The ONS estimated that public sector net financial liabilities (PSNFL) stood at 84.5 per cent of GDP, which was 1.9 percentage points higher than a year earlier, while public sector net debt was at 97.2 per cent of GDP.
Alex Kerr, a 海角视频 economist at Capital Economics, described the recent figures as "disappointing" and emphasised that they "underline the challenges that face the Chancellor". The government's fiscal health came under intense scrutiny at the start of the year amid volatility in the gilt market.
A spike in borrowing costs early in January threatened to erode the Chancellor's buffer against her principal fiscal rule, which mandates that tax receipts should cover day-to-day spending. Although yields have largely rebounded from the losses seen earlier in January, Chancellor Reeves remains in a delicate fiscal situation.
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Capital Economics has revised its estimate of the Chancellor's fiscal leeway, suggesting it has dwindled from £10bn to a mere £2bn, considering that gilt yields are still above their levels at the Budget announcement.
In light of the morning's figures, Darren Jones, Chief Secretary to the Treasury, asserted that adherence to the fiscal rules is "non-negotiable" and committed to trimming superfluous government expenditure. "Through our Spending Review we will interrogate every line of government spending for the first time in 17 years. We’ll root out waste to ensure every penny of taxpayer’s money is spent productively and helps deliver our Plan for Change," he declared.
The upcoming spending review, set to finalise departmental budgets for the coming years, is expected to wrap up in June. Jones, who addressed the matter in a speech the previous day, stated that departments would not secure funding for new initiatives unless they adhere to the Treasury's directive to slash spending by five per cent.