Autumn Statement 2016: Philip Hammond in trouble as government dramatically misses borrowing target
The government has dramatically overshot its target for public borrowing, with a whopping £10bn black hole in the country's finances.
The deficit – a measure of how much more the government spends than it receives – rose to £10.6bn in September. That was £2.5bn over expectations and 14 per cent higher than the same month last year.
It leaves the government "well off track" to meet its ambitious deficit reduction targets and will cast a cloud over Philip Hammond's preparations for his first Autumn Statement at the end of November.
The chancellor has already pledged to ditch George Osborne's plans for an outright budget surplus by the end of the decade, although he has been keen to stress he will not be unleashing a multi-billion pound spending spree without keeping one eye on the public finances.
The figures, released this morning by the Office for National Statistics (ONS), show government borrowing in the first half of the year stood at £45.5bn, only five per cent down on last year. Before the EU referendum, the Office for Budget Responsibility (OBR) forecast the total public sector net borrowing requirement for the entire year would be £55bn.
Economists expect the government to miss that target in spectacular fashion – with a £17bn overshoot being pencilled in.
"Even before the vote to leave the EU, the OBR’s fiscal forecasts were looking optimistic," said Capital Economics' Paul Hollingsworth. "The latest outturn puts the public finances well off track."
In his own response to the figures, Hammond set out to dampen expectations for a big giveaway in the 23 November Autumn Statement.
"Our debt and deficit remain too high," Hammond said. "We remain committed to fiscal discipline and will return the budget to balance over a sensible period of time, in a way that allows us the space to support the economy as needed."
Samuel Tombs of Pantheon Macroeconomics put it more bluntly: "Don't bank on an Autumn Statement giveaway."
PwC's chief economist John Hawksworth added: "Today's public borrowing figures were a bit of a cold shower for the Chancellor after the recent run of generally favourable post-referendum economic data."
Weakness in tax receipts explained the multi-billion pound overshoot in September, with revenues from VAT and income tax – two of the top three money spinners for the government – growing by just 1.4 per cent and 1.2 per cent compared to last year. Meanwhile, government spending jumped by 4.3 per cent.