The UK government has borrowed a lot more money than had been expected in October, making Chancellor George Osborne’s task of reducing the nation’s deficit and drag the economy away from a possible new slump a lot harder to achieve.
According the Office for National Statistics the shortfall was £8.6 billion and excluded the amount the government was giving to support the banks; the figure is a sharp increase from last year’s figure of £5.9 billion. Most economists were predicting a figure of £6 billion. Government spending jumped by 7.4% whilst tax income only increased by 1.8%. Today’s figures raise serious questions over the Conservative pledge that they would reduce the deficit, a slogan that Prime Minister David Cameron has spouted many times since his election.
The deficit news follows the release of the latest Bank of England minutes for its November meeting; they show that the Banks policy makers have little appetite for implementing further monetary stimulus. It follows last week’s warning by the Bank’s governor Mervyn King that the UK faces a difficult period of rising inflation and weak growth.
“Even if the (government’s budget watchdog) assumes that the trend improves a bit, it will still be pretty touch and go whether the Chancellor will be expected to meet his fiscal rules without increasing his austerity measures further,” said Vicky Redwood of Capital Economics.
The unexpected rise makes it increasingly unlikely that the government is still on track to achieve its goal of reducing full-year public sector net borrowing to £120 billion. To reach that the goal the Office for Budget Responsibility says that the UK budget deficit must needs to fall 1.2% every year, so far its 7.4% higher than expected.
“The economy is healing, but it still faces many challenges. These numbers illustrate that, but also show the government’s plans to bring spending under control are on track for the year,” a finance ministry spokesman said.
The Pound to Euro exchange rate is currently trading at 1.2440
The Pound to US Dollar exchange rate is currently trading at 1.5907
The Pound to Australian Dollar exchange rate is currently trading at 1.5350
The Euro to US Dollar exchange rate is currently trading at 1.2785
The Euro to Pound exchange rate is currently trading at 0.8037
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