Higher debt interest payments pushed UK public sector borrowing up last month to much higher levels than economists were expecting, laying bare the challenges facing the next prime minister.
Public sector net borrowing was £20bn in September, £2.2bn more than in the same month last year, and the second highest September borrowing figure since monthly records began in 1993, according to data published by the Office for National Statistics on Friday.
The figure was much larger than the £14.8bn forecast in March by Office for Budget Responsibility, the UK’s official watchdog, and was also higher than the £17bn forecast by economists polled by Reuters.
Interest payments on government debt rose to £7.7bn in September, £2.5bn more than in the same month last year. Higher Interest payments reflect the rise in the retail price index to which index-linked gilds are linked.
James Smith, an economist at ING, said that from the perspective of gilts, “all investors really want to see is a credible fiscal trajectory,” from whoever takes over as prime minister next week.
Central government receipts were £71.2bn in September, which was £7bn more than in the same month last year, thanks to higher tax receipts.
However, higher debt payments pushed government spending to £79.3bn, £5.8bn above the same month last year.
September borrowing figures do not include measures such as the universal £400 energy bill rebate and the energy price freeze that will add to spending from October. These could significantly raise borrowing for the rest of the year.
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