22nd Oct 2019 14:19
(Alliance News) - UK Chancellor Sajid Javid has been dealt a pre-Budget blow as official figures showed the first September hike in government borrowing for five years.
The Office for National Statistics said public sector net borrowing, excluding state-owned banks, rose by GBP60 million to GBP9.4 billion year-on-year in September.
This marks the first September annual rise in borrowing for five years.
The borrowing hike comes despite the government receiving a GBP1.1 billion dividend boost last month from part-nationalised lender Royal Bank of Scotland Group PLC.
The ONS said borrowing was pushed higher due to seasonal payments of GBP2 billion for winter fuel and GBP2.7 billion for student loan write-offs – both of which are recorded in September each year.
In the six months of the financial year so far, government borrowing hit GBP40.3 billion – a rise of GBP7.2 billion on a year earlier.
The September borrowing increase has pushed up Britain's current budget deficit to GBP18.5 billion in the six months of 2019-20 so far – a 29% hike on a year earlier.
But the ONS data showed national debt now stands at 80.3% of gross domestic product, or GDP, down from 81.5% a year earlier.
The figures come just weeks ahead of Javid's November 6 Budget and follow the Chancellor's pledge that he was "turning the page on austerity".
However, economists said figures for the year so far signal he is on track to miss his aim to keep borrowing below 2% of GDP in 2020-21.
And changes to the treatment of student loans – which now assume that many graduates will not be able to repay all their student debts – also mean Javid is likely to overshoot borrowing targets for this financial year.
In March, the Office for Budget Responsibility forecast public borrowing would rise from a 16-year low of 1.1% of economic output in 2018/19 to 1.3% of GDP or GBP29.3 billion in 2019/20.
Pantheon Macroeconomics said the government is set to miss this by a wide margin, forecasting borrowing of around GBP50.3 billion in 2019-20 – or 2.3% of GDP.
Samuel Tombs at Pantheon said Javid is likely to ignore the borrowing headache in the upcoming Budget and with the threat of another general election looming large.
He said: "No political appetite exists for further austerity measures to reduce the deficit.
"Indeed, the Chancellor allocated in last month's Spending Round an extra GBP12 billion to departments to spend in 2020/21, over and above that already planned for in the Spring Statement, while both parties will pledge giveaways to the electorate in the election likely to be held in the coming months.
"If the next Budget is held as currently planned on November 6, voters can expect pre-election sweeteners from the Conservatives."
By Holly Williams, PA Deputy City Editor
source: PA
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