\n<\/p>\n
Rachel Reeves was urged to use next week\u2019s budget to create significantly more headroom against her fiscal rules, after official figures showed the UK government borrowed almost \u00a310bn more than forecast in the year to October.<\/p>\n
In the final snapshot of the public finances before the chancellor\u2019s crunch budget, the Office for National Statistics (ONS) said borrowing \u2013 the difference between public spending and income \u2013 was \u00a317.4bn last month.<\/p>\n
That was lower than the same month last year, but still the third-highest October deficit on record.<\/p>\n
In the fiscal year so far, borrowing was running at \u00a3116.8bn, the ONS said \u2013 \u00a39.9bn more than the independent Office for Budget Responsibility (OBR) expected the government would be borrowing at this point. It will publish new forecasts alongside the budget next week.<\/p>\n
Martin Beck, the chief economist at the consultancy WPI Strategy, said: \u201cAs things stand, total borrowing in 2025-26 could overshoot the OBR\u2019s full-year forecast by around \u00a310bn, pushing the deficit close to 5% of GDP.<\/p>\n
\u201cCombined with policy U-turns, market movements, and a deteriorating productivity outlook, the chancellor\u2019s headroom against her fiscal rules has almost certainly vanished.\u201d<\/p>\n
UK borrowing chart<\/p>\n
The bond markets are a key audience for next Wednesday\u2019s budget, and will be paying close attention to how much \u201cheadroom\u201d Reeves has left herself against her fiscal rules, at the end of the forecast period in five years\u2019 time.<\/p>\n
Nick Ridpath, a research economist at the Institute for Fiscal Studies, said the fact the deficit was running so far ahead of OBR projections made as recently as March emphasised the need for a larger financial buffer.<\/p>\n
\u201cForecasts for the level of borrowing this year are subject to considerable uncertainty, never mind those for borrowing in four or five years\u2019 time,\u201d he said.<\/p>\n
\u201cOperating with minimal fiscal margin for error is risky, and this is one reason why the chancellor might sensibly take steps to increase her so-called \u2018fiscal headroom\u2019 at next week\u2019s budget.\u201d<\/p>\n
Russell Shor, senior market analyst at trading platform Tradu.com, said the size of the headroom would be a key test for government bonds, or gilts.<\/p>\n
\u201cGilt yields saw their biggest jump since July last Friday after reports that income-tax rises had been dropped, turning the budget into a crucial test of fiscal discipline, particularly whether Reeves can unlock roughly \u00a320bn of headroom without unsettling sentiment,\u201d he said.<\/p>\n
The ONS said central government spending was \u00a33.7bn higher in October than a year ago \u2013 pointing to rising benefits payments because of higher-than-expected inflation, and pay increases for public servants.<\/p>\n
Reeves will deliver her second budget on Wednesday against a difficult political background, after the Treasury floated and then ditched plans to raise income tax.<\/p>\n
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Sign up to Business Today<\/span><\/p>\n Get set for the working day \u2013 we’ll point you to all the business news and analysis you need every morning<\/p>\n Privacy Notice: <\/strong>Newsletters may contain information about charities, online ads, and content funded by outside parties. If you do not have an account, we will create a guest account for you on theguardian.com to send you this newsletter. You can complete full registration at any time. For more information about how we use your data see our Privacy Policy. We use Google reCaptcha to protect our website and the Google Privacy Policy and Terms of Service apply.<\/span><\/p>\n after newsletter promotion<\/p>\n She is still expected to raise taxes significantly, in response to a downgrade in economic forecasts from the OBR, and in order to increase the \u00a310bn headroom against her fiscal rules.<\/p>\n The chief secretary to the Treasury, James Murray, said the data underlined the importance of Reeves\u2019s efforts to bring the public finances under control.<\/p>\n \u201cCurrently we spend \u00a31 in every \u00a310 of taxpayer money on the interest of our national debt. That money should be going to our schools, hospitals, police and armed forces. That is why we are set to deliver the largest primary deficit reduction in both the G7 and G20 over the next five years \u2013 to get borrowing costs down,\u201d he said.<\/p>\n The ONS said the government had to pay \u00a38.4bn in debt interest in October \u2013 as payments on inflation-linked gilts, or government bonds, were larger than expected due to continued high inflation.<\/p>\n Alongside tax rises, Reeves is also expected to deliver a package of cost of living measures in the budget, aimed at bringing inflation down. As a first step, she announced on Friday that prescription charges will be frozen for another year.<\/p>\n Reeves\u2019s first fiscal rule says she should try to bring the current budget into surplus by 2030 \u2013 so that day-to-day spending is matched by revenues. The ONS said the deficit on this measure was \u00a312.6bn in October, \u00a32.6bn than forecast by the OBR.<\/p>\n The shadow chancellor, Mel Stride, said: \u201cIf Labour had any backbone, they would control spending to avoid tax rises next week. While Labour plan to spend more and more, Conservatives would cut the deficit and cut taxes with our golden economic rule and our \u00a347bn savings plan.\u201d<\/p>\n The worse-than-expected borrowing figures came as official retail sales data showed an unexpected 1.1% month-on-month decline in October, the first fall since May, with some analysts blaming consumer jitters before the budget.<\/p>\n","protected":false},"excerpt":{"rendered":" Rachel Reeves was urged to use next week\u2019s budget to create significantly more headroom against her fiscal rules, after official figures showed the UK government borrowed almost \u00a310bn more than forecast in the year to October. In the final snapshot of the public finances before the chancellor\u2019s crunch budget, the Office for National Statistics (ONS)<\/p>\n","protected":false},"author":1,"featured_media":34658,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[48],"tags":[5171,19659,113,1845,558,368],"class_list":{"0":"post-34657","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-politics","8":"tag-borrowing","9":"tag-borrows","10":"tag-budget","11":"tag-expected","12":"tag-government","13":"tag-setback"},"_links":{"self":[{"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=\/wp\/v2\/posts\/34657","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=34657"}],"version-history":[{"count":0,"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=\/wp\/v2\/posts\/34657\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=\/wp\/v2\/media\/34658"}],"wp:attachment":[{"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=34657"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=34657"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=34657"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}