October public borrowing worse than expected

Deficit reduction doesn't look like Osborne's strong suit anymore, as figures show public sector borrowing hits £8.6bn in October.

by Michael Northcott
Last Updated: 19 Aug 2013

In a blow for the chancellor's credibility on fiscal discipline, the Office for National Statistics (ONS) today revealed that government borrowing in October was £8.6bn, considerably higher than expected. Analysts were forecasting just £6bn of borrowing for the period, and that would have meant borrowing did not increase compared with the previous October. But alas, the borrowing has risen year-on-year. 

The other side of the coin, tax take, wasn’t encouraging either. Corporation tax receipts took a severe plunge, down 10% compared with the same period the previous year. This, combined with increased day-to-day spending in government departments means that in the seven months of the financial year so far, public borrowing is £5bn higher than it was in the same period from 2011-2012. 

But when the national debt is over a trillion pounds and we’ve still got our AAA credit rating, does an extra £5bn matter, you might ask? Well, yes really. Moody’s ratings agency has already warned that it will review the UK’s top-end credit rating early next year, and George Osborne will now face further political pressure to change course. This was the last set of borrowing results before his Autumn Statement, due next month, and austerity will be increasingly hard to justify when borrowing seems to keep rising anyway.

On the optimistic side, some analysts have suggested that the jump in borrowing in October could be down to the government introducing a new system of budgeting for its spending. In other words, the jump could be down to the timing of a one-off accounting quirk. Nonetheless, the chancellor is expected to admit in his Autumn Statement that there maybe an additional three years austerity required to rein in borrowing to the target set when he took office. The plan was for net debt to be falling as a proportion of GDP by 2015, but this recent knock and the ongoing eurozone crisis are being blamed for a more protracted recovery process.

It won’t have escaped many people’s notice that disappointing corporation tax take is the major culprit here. Public clamour to see Starbucks, Google, Facebook et al cough up some cash will no doubt intensify…

Find this article useful?

Get more great articles like this in your inbox every lunchtime

Upcoming Events

Latest on MT

5 things you didn't know about R&D tax credits

5 things you didn't know about R&D tax credits

Is your business innovating? You could claim back tax on fuel, staff and other costs.

Can you start your own business without quitting your day job?

Can you start your own business without quitting your day job?

Torn between the freedom of the start-up life and the security of the payroll? As a part-time entrepreneur you can have both.

Meet the entrepreneur making credit scores free

Meet the entrepreneur making credit scores free

Former ZAPP CMO Justin Basini has built an ad-funded credit score start-up with more than 2 million users.

Do companies actually believe in gender equality?

Do companies actually believe in gender equality?

Diversity programmes may be great to pad out the CSR page on your website, but be ready to practise what you preach.

Which Olympic sport matches your small business style?

Which Olympic sport matches your small business style?

Sponsored: Are you a target-focused archer or a soaring pole vaulter?

Aldi and Lidl will continue to grow

Aldi and Lidl will continue to grow

UPDATE: The discounters' market share is already expanding at the expense of the Big Four, and economic uncertainty over Brexit will only help them.