Chancellor Rachel Reeves faces a fresh headache ahead of her first Budget this autumn after official figures revealed Government borrowing jumped by more than expected last month.
Borrowing rose to £13.7 billion last month, marking the third highest August on record, driven by higher spending on public services due to increased running costs and pay increases.
The increase means public sector debt hit 100% of gross domestic product (GDP) at the end of August 2024.
Public sector net borrowing excluding public sector banks was £13.7 billion in August 2024, £3.3 billion more than in August 2023 and the third highest August borrowing on record, behind 2020 and 2021.
Read more ➡️ https://t.co/TZURmjBKXB pic.twitter.com/K8CN79gvPp
— Office for National Statistics (ONS) (@ONS) September 20, 2024
The figure, which excludes public sector banks, means national debt is at levels last seen in the early 1960s, the Office for National Statistics (ONS) said.
ONS chief economist Grant Fitzner said: “Borrowing was up by over £3 billion last month on 2023’s figure, and was the third highest August borrowing on record.
“Central Government tax receipts grew strongly, but this was outweighed by higher expenditure, largely driven by benefits uprating and higher spending on public services due to increased running costs and pay.”
The total for August was also more than the £11.2 billion forecast by Britain’s official forecaster, the Office for Budget Responsibility (OBR), and more than the £13 billion most economists were pencilling in.
Public sector net debt excluding public sector banks was £2,768.0 billion at the end of August 2024, provisionally estimated to be around 100.0% of the UK’s annual gross domestic product. pic.twitter.com/hUp407Lhsv
— Office for National Statistics (ONS) (@ONS) September 20, 2024
Chief Secretary to the Treasury Darren Jones said: “When we came into office, we inherited an economy that wasn’t working for working people.
“Today’s data shows the highest August borrowing on record, outside the pandemic. Debt is 100% of GDP, the highest level since the 1960s.
It comes after the new Chancellor accused the previous Conservative government of leaving a £22 billion black hole in the public finances.
Borrowing in the financial year so far to August 2024 was £64.1 billion, £0.3 billion more compared to the same five-month period a year earlier.
Isaac Delestre, research economist at the Institute for Fiscal Studies, said: “With large swathes of the tax system seemingly off-limits due to Labour’s manifesto commitments, the Chancellor is going into this year’s Budget with one hand tied behind her back.
“There will be a temptation to increase revenues in ways that would be economically damaging.
“Stamp duty deserves a special mention as a tax that should not be increased.
“If she takes the opportunity to improve taxes, as well as increase them, she could be rewarded not only with more revenue but also with a tax system that is fairer and less of an impediment to growth.”
