UK public sector net borrowing was £18.8bn in October

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UK public sector net borrowing was £18.8bn in October
UK chancellor Rishi Sunak as public sector borrowing hit £18.8bn October. Photo: Tayfun Salci/Anadolu Agency via Getty

Public sector net borrowing, excluding public sector banks, hit £18.8bn ($25.3bn) in October 2021, according to the latest data from the Office for National Statistics (ONS). 

This was the second-highest October borrowing since monthly records began in 1993, at just £200m less than October 2020, but still £7.2bn more than October 2019, reflecting the continuing impact of the pandemic interventions on public finances.

The figure was far higher than the £13.8bn forecast by economists polled by Reuters.

"Public finances are not in a much stronger financial position than last month according to today’s data, with borrowing cut by about one-eighth. The end of government subsidising the furlough scheme and Stamp Duty holiday will have contributed to this marginal reduction," said Hoa Duong, economist at PwC.

Public sector borrowing in the financial year-to-October 2021 came in at £127.3bn, again the second-highest financial year-to-October borrowing since monthly records began. This was £103.4bn less than in the same period last year.

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The UK government spent £78.8bn in October — £1.5bn more than in the same month last year despite pandemic programmes such as furlough and the self-employment income support scheme coming to an end.

Public sector net debt excluding public sector banks stood at £2,277.6bn at the end of October 2021. This correlates to around 95.1% of gross domestic product (GDP) — a level not seen since the early 1960s.

Interest payments on public debt, linked to the surging retail price index — a measure of monthly inflation data — tripled year-on-year to £5.6bn in October, a rise of £3.8bn on the same time last year.

Central government receipts were also £3.8bn, or 6.2%, higher than in October 2020, at £65.5bn, as business activity continued to gather steam after the impact of COVID-19.

The coronavirus pandemic meant low receipts and high expenditure for the UK government in the 2021 financial year, from April 2020 to March 2021.

Government support for individuals and businesses during the pandemic contributed to a 27.7% rise of £204.4bn in central government day-to-day spending, bringing the total to £942.5bn.

As a result, the public sector borrowing totalled an estimated £323.1bn. This is equivalent to 15.1% of GDP, the highest such ratio since the end of the Second World War, when it was 15.2%.

Meanwhile, retail sales rose in October after five months of no growth, driven in part by Brits flocking to department stores and toy shops ahead of the holiday season.

Retail sales volumes rose by 0.8%, with volumes 5.8% higher than their pre-coronavirus levels (COVID-19).

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"People are expected to spend more for a special Christmas this year and the ‘golden quarter’ for retail starting in October has seen consumers pushing spending forward. 

"Yet we expect a low likelihood of significantly increased income from taxes, such as VAT and customs duties, as a result of concerns over surging inflation and trade friction," said Duong.

"It will be a tricky battle between ‘splurge and squeeze’ in spending for the chancellor in terms of following through with the levelling-up agenda promised in the spring budget. As of October, the public sector net debt stood at £59bn, which is about 132% of the OBR’s provision for the month according to its revised forecasts last month.

"This leaves even less breathing room in the accounts for the chancellor when it comes to pursuing the levelling-up agenda, given the disruption caused by the pandemic. This challenge will be worsened by the risks of polarised and unequal regional recovery."

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