Officials have revealed that public sector borrowing has risen by a fifth during the first half of the financial year. For the same period in 2018, the borrowing for the six months to September has now hit £40.3 bn, up £7.4bn.
The amount of borrowing was £9.4bn in September, which is lower than expected but still up from £8.8bn last year. The figures raise questions about the chancellor’s room to maneuver in next month’s Budget.
Finance Minister Sajid Javid has stated that he is “turning the page on austerity” and promised big spending rises in his November statement. John Hawksworth, the chief economist at PwC, said: “Today’s data showed the UK public finances heading further into the red, with the deficit more than £7bn higher in the first half of this financial year than the same period last year.”
“This borrowing overshoot will not make the chancellor’s choices any easier as he heads towards his first Budget on 6 November,” he added. The borrowing figures for September indicate the first annual rise in that month for five years, said the Office for National Statistics (ONS).
Last month, the government received a £1.1bn dividend boost from part-nationalized lender Royal Bank of Scotland. According to the ONS, borrowing was pushed higher due to seasonal payments of £2bn for winter fuel and £2.7bn of student loan write-offs – both of which are recorded in September each year.
Thomas Pugh, the UK economist at Capital Economics said, “September’s better-than-expected public finance figures do not change this year’s overarching themes of higher spending and borrowing. If anything, today’s release will only encourage the chancellor to loosen fiscal policy at the Budget next month.”
“We already know that the chancellor wants to review the fiscal rules in the Budget on 6 November, as there is very little chance of hitting the current ones.
“We don’t know what the new fiscal rules will be, but they are likely to allow for a substantial loosening of fiscal policy at the Budget, which would support economic growth. Of course, whether this happens depends on whether there is a Brexit deal.”