October borrowing hits six-year high

20 Nov 15

Public sector borrowing in October stood at £8.2bn, the highest deficit for the month since 2009, according to official figures.

The latest edition of the Office for National Statistics’ Public Sector Finances report found that public sector net borrowing in October was £1.1bn than in the same month in 2014.

This increase was mainly due to higher central government borrowing. Expenditure in the month increased by £1.9bn compared to 2014, while receipts in the period were £1bn lower.

However, borrowing for financial year to date remains £6.6bn lower than the same seven-month period in 2014/15 at £54.3bn.

Responding to the figures, the Centre for Economics and Business Research said the rise in October borrowing provided a “cloudy backdrop” to Chancellor George Osborne’s Spending Review and Autumn Statement next week.

October is an important month for corporation tax, with many medium and large domestic firms paying their second instalment of four on their 2014/15 profits, CEBR economist Sam Alderson stated.

While corporation tax receipts are up in the financial year to date, October’s receipts were somewhat disappointing, decreasing by 1.1% compared with the same month a year ago.

Higher central government expenditure represented a real-terms rise in spending given the near-zero inflation rate throughout the current financial year, he highlighted.

“Still, while the practicality of further deep cuts could be questioned, in the near future these announcements are unlikely to help the chancellor meet his current target for a budget deficit of £69.5bn in 2015/16.

“Borrowing over the fiscal year to date currently stands at £54.3bn, £6.6bn less than at the same point last year. This current trend suggests that borrowing will come in just shy of £79bn. As such, it is likely that the OBR will be revising up its borrowing forecast at next week’s Autumn Statement.”

The OBR has forecast a deficit of £69.5bn in 2015/16.

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