- Borrowing of £17.4 billion in October – only eclipsed by Covid hit October 2020
- Cash coming in rose by £2.9 billion compared to same period in 2023
- This is despite the National Insurance (NI) cut which is largely responsible for a £1.1 billion fall in social contributions
- Public sector pay rises behind the £2.5 billion jump in spend on goods and services
Danni Hewson, AJ Bell head of financial analysis, comments on the latest public sector finances:
“Whilst this set of figures predates the chancellor’s tax raising Budget, the numbers raise big questions about whether the measures announced at the end of October will be enough to balance the books.
“Borrowing shot up in the month of October to levels only eclipsed by the amount needed at the height of the pandemic when millions of people’s wages were being subsidised by the government.
“At £17.4 billion the figure is significantly higher than had been forecast by economists and £1.6 billion higher than last year when cost of living payments were still being funnelled into many household bank accounts.
“The decision to increase public sector pay has played a massive part, with the cost of government spend on goods and services up a significant £2.5 billion in October.
“Whilst the tax take was also up considerably, boosting total receipts by £3.8 billion, that was offset by the cut to NI contributions implemented by the previous government.
“An increase in debt interest payments didn’t help but the end of cost of living payments did mean that despite the uprating of benefits, the additional spend was only £0.5 billion compared to the same time last year.
“Rachel Reeves has promised that she won’t borrow to fund day-to-day spending which is why the Budget contained those huge and unpopular tax increases. But if jobs are cut, if wages don’t go up as they might otherwise have done, and if inflation does remain steadfastly sticky, then those sums get rather more difficult and the spectre of further tax increases looms that bit larger.”
