Total UK government borrowing beats OBR forecast
UK government has already borrowed more this year than the Office for Budget Responsibility forecast, official data has revealed, wrapping up a difficult 12 months for Rachel Reeves as she grapples with keeping public finances safe from further shocks.
The Office for National Statistics (ONS) estimated public sector borrowing to have been £11.6bn over the last month of the calendar year.
The figure came under a £13.4bn forecast by City analysts.
Total borrowing across the financial year has now reached £140.4bn while the OBR forecast total borrowing of £138.3bn over the current year.
“Borrowing in December was substantially down on the same month in 2024, as a result of receipts being up strongly on last year whereas spending is only modestly higher,” Tom Davies, deputy director for the public sector division at the ONS, said.
Statisticians also said the current budget deficit, the crucial measure for Reeves which takes the difference between taxes and spending on day-to-day activities, was £5.8bn over the month and £94.9bn over the financial year.
Public sector debt as a share of GDP was estimated at 95.5 per cent. The government is also estimated to have paid some £9.1bn to its lenders through debt interest payments.
Chief secretary to the Treasury James Murray said the government was aiming to deliver “value” for taxpayers’ cash.
“Last year we doubled our headroom and we are forecast to cut borrowing more than any other G7 country with borrowing set to be the lowest this year since before the pandemic.
“It cannot be right that £1 in every £10 we spend goes on debt interest – which could be better spent on our nurses, police officers and teachers – that’s why we’re tackling it.”
Reeves’ challenge in curbing government borrowing
The latest set of data on spending precede government plans to increase welfare benefits for thousands of families with more than three children and pensioners through the triple lock.
They also come before business rates hikes for hospitality, retail and other major businesses are locked in.
The government is set to offer pubs some temporary relief from big tax ills, with Reeves admitting on Wednesday that the “situation the pubs face is different from other parts of the hospitality sector”.
Most proposed changes on taxation and spending will only kick into effect from April at the start of the new tax year.
Reeves has this week trumpeted the UK as a “stable” destination for investors, with her commitment to maintaining her fiscal rules being one of her main key talking points in building up her credibility.
But Richard Hughes, the former chair of the Office for Budget Responsibility (OBR), took aim at her rules’ reliance on changing forecasts between fiscal events.
He suggested the UK had struggled to build “fiscal resilience” from economic shocks, including routs in bond markets, due to Reeves running a budget deficit of around 5 per cent of GDP.
“Fiscal rules that we now have in place are amongst the loosest that the UK has had in its history,” Hughes told Lords on the Economic Affairs Committee two weeks ago.
“The rules we have at the moment are providing the government the capacity to run a quite significant structural deficit.”