UK public sector net borrowing reached £24.5bn in September, higher than expected, as rising inflation pushed up the cost of servicing government debt. The Office for National Statistics published the monthly figures ahead of the budget next Wednesday, the first to be delivered by John Healey.
Debt interest drives the overshoot
Government debt interest paid in the month came to £10.9bn, the highest September figure since records began. Some gilts are linked to the retail prices index, so their payments rise as RPI climbs, and RPI has risen in recent months as the Iran war pushed up energy costs. That linkage added £4bn to debt interest costs in September, according to the ONS.
The month’s deficit was £1.9bn above the Office for Budget Responsibility’s forecast. Debt interest has now topped £10bn in a single month on eight occasions.
Year-to-date picture
Public sector net borrowing for the financial year so far stands at £97.8bn. That is £4.4bn lower than a year earlier, but £6bn higher than the OBR had expected.
Total government debt is estimated to have reached £3 trillion for the first time, equal to 94 percent of GDP, down from 95 percent a year earlier. Reeves had built a £24bn fiscal buffer at the spring forecast. Healey is expected to accept a smaller buffer when he stands up on Wednesday.
Budget squeeze
Higher inflation tends to lift tax receipts, but it leaves departments with less room within fixed budgets.
Related: UK Inflation Rate Hits 3.5% in September · US Inflation Rate Hits 3.7% in September
Source: Office for National Statistics
