UK Public Borrowing Surges, Adding To Govt Pressures

Posted by African Examiner Latest Headlines, World News Wednesday, January 22nd, 2025

(AFRICAN EXAMINER) – UK public borrowing jumped more than expected in December, official data showed Wednesday, adding pressure to the Labour government and Prime Minister Keir Starmer as they battle economic headwinds.

Public-sector borrowing stood at £17.8 billion ($21.9 billion) last month, a £10 billion increase from December 2023, the Office for National Statistics said.

“Borrowing last month was the third highest in any December on record,” said Jessica Barnaby, deputy director for public-sector finances at the ONS.

The figures add to pressures on Rachel Reeves, the chancellor of the Exchequer, to reassure the markets that her budget policies of tax rises and higher borrowing to invest will meet the government’s aim of boosting economic growth.

Reeves has had to deal this month with a slump in the pound and a temporary surge in UK gilts, or bonds, as markets reacted to a struggling UK economy amid a global increase in bond rates.

“Market interest rate expectations and gilt yields… are still higher than at the time of the budget and suggest that the chancellor’s headroom… has been whittled down,” said Alex Kerr, UK economist at research group Capital Economics.

“That combined with a weakening economy suggests that, in order to meet her fiscal rules, the chancellor may need to raise taxes and/or cut spending in the next fiscal statement,” he added.

The fiscal rules laid out in the government’s inaugural budget set a target of meeting day-to-day spending with revenue rather than borrowing.

“Economic stability is vital for our number one mission of delivering growth, that’s why our fiscal rules are non-negotiable and why we will have an iron grip on the public finances,” senior Treasury official Darren Jones said in response to Wednesday’s figures.

The ONS attributed the higher borrowing to increased spending on public services, benefits and debt interest payments.

Britain’s fiscal watchdog, the Office for Budget Responsibility, will on March 26 present a forecast for the financial year that will indicate whether the government is sticking to its borrowing rules.

Labour returned to power in July following 14 years of Conservative governments.

AFP