Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favorite tales on this weekly publication.
The UK government borrowed £14.9bn in October, greater than analysts anticipated and the second-highest determine for the month, in accordance with official figures that verify the continued strain on public funds.
In the monetary yr to October, the deficit was £98.3bn, £21.9bn greater than in the identical seven-month interval final yr however lower than forecast by the Office for Budget Responsibility in March.
The elevated deficit reported by the Office for National Statistics is unlikely to discourage chancellor Jeremy Hunt from responding to strain from inside the Conservative celebration for cuts in private taxes in his Autumn Statement on Wednesday. Prime Minister Rishi Sunak on Monday insisted any cuts can be made in a “sustainable” approach.
The UK deficit this yr has broadly undershot predictions from the OBR, the government fiscal watchdog, as high inflation lifted UK tax receipts. Borrowing through the present monetary yr was £16.9bn lower than the £115.2bn forecast by the OBR in March.
But Samuel Tombs of Pantheon Macroeconomics warned that the figures offered a “timely reminder that the task of restoring the public finances to a sustainable footing is far from complete”.
Responding to the ONS knowledge, Hunt mentioned: “We met our pledge to halve inflation, but we must keep on supporting the Bank of England to drive inflation down to 2 per cent. That means being responsible with the nation’s finances.
“At my Autumn Statement tomorrow, I will focus on how we boost business investment and get people back into work to deliver the growth our country needs.”
The deficit in October was worse than a forecast of £12bn from a Reuters ballot of economists, reflecting greater than anticipated debt curiosity funds.
Nevertheless, economists mentioned they anticipated the chancellor would retain a sufficiently beneficiant quantity of fiscal “headroom” towards his key debt-reduction goal to plough forward with a modest fiscal giveaway within the Autumn Statement, as a part of a bid to raise the economic system forward of a attainable election subsequent yr.
The OBR was more likely to choose the chancellor had a buffer of about £25bn towards his fundamental fiscal rule, mentioned Ruth Gregory, deputy chief UK economist at Capital Economics. “With the election drawing nearer, the chancellor surely won’t be able to resist the temptation to unveil a pre-election splash.”
She added: “This won’t be a big fiscal loosening, rather a partial reversal of the planned tightening.”
Underscoring the UK’s persevering with development problem, labour productiveness fell within the third quarter and was solely marginally up from earlier than the pandemic.
UK output per hour labored within the third quarter was 0.3 per cent beneath the identical quarter a yr in the past, in accordance with separate knowledge printed on Tuesday by the ONS. The fall brings labour productiveness to solely 2.5 per cent above its 2019 stage.
The ONS warned that estimates for labour productiveness have been topic to revision due to the high uncertainty over labour market statistics following the post-pandemic drop in response charges to the ONS labour power survey.
