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The British government borrowed more than expected in December, underscoring the challenge facing Chancellor Rachel Reeves as she tries to restore confidence in her fiscal plans and revive growth.
Borrowing – the difference between public sector spending and income – stood at £17.8bn last month, £10.1bn more than in December 2023, and the third highest highest ever recorded in December, data from the Office for National Statistics showed on Wednesday.
It was higher than the £14.1 billion expected by economists polled by Reuters and the £14.6 billion forecast by the Office for Budget Responsibility, Britain’s budget watchdog, in its latest set of projections carried out in October.
Borrowing in the first nine months of the financial year totaled £129.9 billion, £8.9 billion more than in the same period last financial year. It is also the second highest borrowing between April and December since monthly records began in January 1993.
Jessica Barnaby, deputy director of public sector finance at the ONS, said “spending on public services, benefits, debt interest and capital transfers have all increased, while an increase “In tax revenue was partly offset by a reduction in national insurance contributions, following the rate cut earlier in 2024.”
Reeves sought to reassure investors after UK decision borrowing fees this month has reached its highest level since the global financial crisis, threatening its ability to meet a self-imposed fiscal rule under which daily expenses are covered by tax revenues.
Following the release of December’s borrowing figures, Darren Jones, Chief Secretary to the Treasury, said: “Economic stability is vital to our number one mission of generating growth. This is why our budgetary rules are non-negotiable and why we will have an iron fist. on public finances. »
The OBR, which must produce two forecasts per financial year, will provide an update on March 26 on whether Reeves is still on track to meet its own borrowing rules.
UK borrowing costs have fallen since last week’s figures showed inflation slowed down unexpectedly in Decemberand the sell-off in global bonds has eased.
But the government remains under pressure to turn around the economy, which grew just 0.1 percent in November after slight contractions in September and October.
“As the bond market calmed last week and fears of an emergency mini-budget eased, the Chancellor will be keenly aware of the dissipation of public finances as we head towards the economic forecast and budgetary statements of the OBR scheduled for March 26.” said Joe Nellis, an economic adviser at MHA, the accounting and consulting firm.
Sterling remained down 0.2 percent at $1.23 after the figures were released.