UK debt increases before the budget

The third-highest September since records began in January 1993 was reached last month when government borrowing increased.

According to official data, borrowing—the shortfall between spending and tax revenue—amounted to £16.6 billion, maintaining a pattern of exceeding government projections.

Since the Treasury has decided not to borrow money to pay for daily expenses, the numbers pose a dilemma for the department in next week’s budget.

However, it is anticipated to modify its self-imposed debt regulations to allow it greater investment flexibility, allowing it to allocate more funds to longer-term initiatives.

The fiscal “black hole” that the incoming Labour government inherited “will require difficult decisions” to close, according to Chief Treasury Secretary Darren Jones.

According to economists, Labour may choose to reduce expenditure or hike taxes in the October 30 budget in an effort to address the government’s chronic borrowing and debt.

Jones gave his most explicit hint yet last week that Labour will reform its fiscal rules to enable it to borrow money to engage in large infrastructure projects, which has led some to believe that it will do so.

“Today’s data highlights the scale of the public finances challenges facing the chancellor,” said Resolution Foundation senior economist Cara Pacitti.

Higher debt interest rates and public sector pay increases, like the one Labour provided junior doctors in July to terminate their strike action, were cited by the Office for National Statistics (ONS) as contributing factors to the spending surge.

The annual increase in inflation-linked benefits was outweighed by Labour’s reduction in winter fuel subsidies for wealthier pensioners, which caused the social benefits bill to drop by £2 billion to £25.7 billion.