The UK government borrowed more than expected in October as debt interest payments pushed the public finances deeper into the red, piling pressure on Rachel Reeves as she attempts to grow the economy.
Borrowing rose to £17.4bn last month, the second highest October figure since monthly records began in 1993.
City economists had expected a smaller figure, of about £12.3bn for October, after the UK borrowed more than £16bn in September.
The Office for National Statistics (ONS) said public sector net borrowing was £1.6bn higher than the same month last year.
In a further blow to efforts by Reeves, the chancellor, to bolster the economy and bring down debt levels, the figures showed that monthly central government debt interest rose to £9.1bn – the highest October figure on record.
Alex Kerr, an economist at the consultancy Capital Economics, said the “disappointing” figures underlined the fiscal challenge that the chancellor faced.
He said while Reeves had downplayed the chances of further tax-raising measures, “if she wants to increase day-to-day spending in future years, she may need to raise taxes to pay for it”.
The ONS said an expected drop in tax receipts after two big cuts to national insurance contributions had failed to materialise. “However, with spending on public services, benefits and debt interest costs all up on last year, expenditure rose faster than revenue overall,” it said.
The increase in debt payments in October was mainly due to rises in the retail prices index measure of inflation, which sets the repayment rates on index-linked government bonds.
Darren Jones, the chief secretary to the Treasury, said: “We inherited a £22bn black hole in our public finances from the previous government. At the budget we addressed this, fixing the foundations and putting public finances on a sustainable footing to rebuild the country.
“This government will never play fast and loose with the public finances. Our new robust fiscal rules will deliver stability by getting debt down while prioritising investment to deliver growth.”
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Matt Swannell, the chief economic adviser to the EY Item Club, said: “Despite the changes announced at the budget, fiscal policy will continue to tighten over the next few years.
“Moreover, the chancellor has left herself little [wriggle] room against her own fiscal rules and may need to implement more tax rises in future years if the tax take disappoints or spending proves higher.
“Indeed, if the rise in market interest rates since the budget is sustained, the government would already have less headroom against its fiscal targets.”
