Government’s November Borrowing Reaches Three-Year Low

Official data indicates that government borrowing decreased in November. This reduction was attributed to increased tax receipts and reduced expenditure on the nation’s debt interest payments. The Office for National Statistics (ONS) reported that borrowing, defined as the gap between government spending and tax revenue, amounted to £11.2 billion last month, marking the lowest November total recorded since 2021. Concurrently, separate data from the ONS revealed a slight increase in retail sales during the previous month, partly boosted by robust performance in supermarkets. These recent statistics emerge amidst a backdrop of subdued economic growth in the UK and inflation, which measures the rate of price increases over time, accelerating at its quickest rate since March. The borrowing figure for November represented a decrease of £3.4 billion compared to the corresponding month of the previous year and fell short of forecasts, which were approximately £13 billion. Consequently, the government’s cumulative borrowing since the commencement of the current financial year has reached £113.2 billion. While this sum is lower than that recorded for the same period last year, it exceeds the Office for Budget Responsibility’s (OBR), the government’s forecasting body, predictions by £2 billion. Debt interest payments decreased by £4.7 billion from the previous year, settling at £3 billion, primarily as a result of reduced inflation. Ruth Gregory, deputy chief UK economist at Capital Economics, commented that November’s borrowing “undershooting” expectations signified that “Christmas has come early” for Chancellor Rachel Reeves. However, she further noted that despite the chancellor likely being encouraged by these recent figures, the weakening state of the UK economy suggested an increasing likelihood of additional tax increases or reductions in public spending. Dennis Tatarkov, a senior economist at KPMG UK, additionally stated that the government had received some “temporary respite” owing to reduced interest repayments, but cautioned that this trend was “unlikely to last as actual and projected inflation has moved up in recent months”. The ONS reported that retail sales experienced a 0.2% increase in November, following a 0.7% decline in October; however, the growth in supermarket sales was partially counteracted by a decrease in clothing sales. Nevertheless, the most recent survey period conducted by the ONS did not encompass the official Black Friday date of November 29. These most recent economic statistics were released subsequent to the Bank of England’s decision on Thursday to maintain interest rates, where it indicated its belief that the UK economy had underperformed expectations, exhibiting no growth whatsoever between October and December. The Bank revised its growth projection for the final quarter of 2024 downwards, from 0.3% to zero growth. These revisions to growth forecasts were perceived as a setback for the Labour party, which has prioritized economic expansion. Additional data published this week indicated that inflation reached 2.6% in the year ending November, surpassing the Bank’s 2% target. In response to the most recent borrowing statistics, Darren Jones, Chief Secretary to the Treasury, stated that the government had “inherited crumbling public services and crippled public finances” upon assuming office. He further commented, “Now we have wiped the slate clean, we are focused on investment and reform to deliver growth.” Daisy Cooper, deputy leader of the Liberal Democrats, described the reduced November borrowing as “good news,” but also remarked that “the bigger picture remains deeply troubling.” She asserted that individuals were “still feeling the pain of the previous Conservative government’s economic mismanagement,” while also suggesting that the new Labour administration required “a far better plan to turn things around.” During the Budget, the chancellor modified the government’s self-imposed debt regulations to allocate billions for infrastructure projects, which she claimed would stimulate economic growth and generate employment. Alison Ring, director of public sector and taxation at the ICAEW, a trade body for accountants, stated, “What will worry government is that recent economic indicators such as weak [economic] growth and rising inflation are flashing amber.” She further commented, “Money remains extremely tight and that is unlikely to change any time soon.” The recovery in retail sales during November was marginally less robust than anticipated, with overall sales projected to decrease for the year. According to Capital Economics, sales presented a varied picture, with an increase in supermarket activity contrasting with a downturn in department and clothing stores “as households continued to delay spending on winter clothing.” Nick Stowe, chief executive of Monsoon Accessorize, indicated that retailers had “seen quite soft demand” attributed to low consumer confidence, which particularly impacted clothing shops. Copyright 2024 BBC. All rights reserved. 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