Government borrowing in the UK fell to £11.2 billion in November, the lowest figure for the month since 2021, as tax revenues increased and debt interest payments decreased, according to official data from the Office for National Statistics (ONS).
The borrowing figure for November was £3.4 billion lower than the same month last year and below the expected £13 billion. As a result, the total government borrowing for the current financial year stands at £113.2 billion, which is lower than the same period in 2023 but £2 billion above the forecasted figure from the Office for Budget Responsibility (OBR).
The reduction in borrowing was primarily attributed to a £4.7 billion decrease in debt interest payments, which dropped to £3 billion due to lower inflation. This lower cost of borrowing has provided the government with some relief, with Ruth Gregory, deputy chief UK economist at Capital Economics, noting that the borrowing undershoot is a “positive” for Chancellor Rachel Reeves.
However, Gregory cautioned that the UK’s weak economic performance could lead to future tax hikes or spending cuts. Senior economist at KPMG UK, Dennis Tatarkov, echoed this sentiment, warning that while lower interest repayments offer temporary relief, the trend may not last as inflation remains volatile.
In retail news, the ONS reported a modest 0.2% rise in retail sales for November, following a 0.7% decline in October. Strong supermarket sales helped offset a drop in clothing sales, although the ONS noted that its survey did not include Black Friday sales data. Despite the increase, consumer confidence remains low, with many households still delaying spending, especially on winter clothing.
The latest figures come as the Bank of England forecasts weak economic growth, downgrading its growth outlook to zero for the final quarter of 2024. Inflation has also remained above target, hitting 2.6% in November, further complicating the country’s economic recovery.
Darren Jones, Chief Secretary to the Treasury, responded to the borrowing data by emphasizing the government’s focus on investment and reform to deliver economic growth. However, Liberal Democrat deputy leader Daisy Cooper warned that while the lower borrowing figure is “good news,” the broader economic picture remains troubling, highlighting the lingering effects of the previous government’s economic policies.
Alison Ring, director of public sector and taxation at the ICAEW, expressed concern that weak economic growth and rising inflation may continue to strain the government’s finances, with money remaining “extremely tight.”
Despite the challenges, the UK government continues to push forward with plans for infrastructure spending to stimulate growth and job creation, as Chancellor Reeves aims to balance public finances while boosting economic recovery.
