Figures confirming the highest level of Government October borrowing for six years have placed greater pressure on George Osborne, ahead of key spending announcements next week.
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“October’s poor borrowing numbers extinguish any lingering hope that the chancellor will be able to soften his austerity plans materially in next week’s autumn statement”, said Samuel Tombs, chief United Kingdom economist at the consultancy Pantheon Macroeconomics.
So far, Osborne has had little difficulty making large spending cuts, but many economists say further hefty reductions in spending on public services and welfare are likely to become harder, as the easiest cuts have already been made.
With the government still running deficits each month, the UK’s total debt pile is still increasing, according to the ONS.
The Office of Budget Responsibility is expected to raise its estimate for this year’s budget deficit.
Until late past year, strong economic growth had failed to translate into much of an increase in tax revenues, but since then, an increase in the number of people in work and a gradual pick-up in wages have boosted revenue.
Official data on Friday showed Britain’s headline public borrowing rose to 8.2 billion pounds in October from 7.1 billion pounds a year earlier, higher than all forecasts in a Reuters poll that predicted borrowing of only 6.0 billion pounds.
A Treasury spokesperson argued the figures underlined the need to cut back public spending drastically in next week’s Autumn Statement.
“The chancellor has staked his reputation on achieving a surplus in 2019-2020”, said Philip Shaw, chief economist at London-based Investec Securities. “So absolutely delivering the necessary budget savings is critical”. “If he’s got his eye set on moving next door, he should take heed of those voices telling him not to go that strongly on cuts”. Revenue was depressed as the Treasury received less in gilt-coupon payments from the Bank of England’s Asset Purchase Facility.
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For Chancellor George Osborne, these figures mean that he is going to have to restrict borrowing to only £ 15 billion between now and April of 2016.
