UK debt costs push government borrowing to £17.4bn

The government’s borrowing bill rose more than expected before Labour’s budget last month on the back of spending on public sector pay and rising debt interest costs.
Official figures show that a measure of public sector net borrowing hit £17.4 billion in October, higher than estimates of £12.3 billion from economists. The Office for Budget Responsibility, the government’s independent fiscal watchdog, had forecast £16.1 billion.
The borrowing total was the second-highest figure for October ever recorded, according to the Office for National Statistics (ONS), which calculated the national debt ratio at 97.5 per cent of GDP.
Government borrowing, which is the difference between state spending and receipts, was pushed up by higher interest rate payments on the national debt caused by a rise in the retail prices index. The government spent £9.1 billion on debt interest last month, up £500 million from the same month last year.
The borrowing total was also pushed up by the government’s decision to boost public sector pay with deals of up to 6 per cent a year after Labour came into office in the summer.
The ONS said total tax receipts grew by £3.8 billion to £61.3 billion, driven by growing corporation tax and income tax. The Conservatives’ cut to national insurance made earlier this year led to a £1.1 billion drop in revenues from the levy.
In her first budget on October 30 Rachel Reeves, the chancellor, switched the government’s debt target from public sector borrowing, excluding the public sector banks, to a broader measure of the state’s balance sheet in an attempt to avoid penalising investment.
Darren Jones, chief secretary to the Treasury, said: “We inherited a £22 billion 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.”