Wiggle room? Pressure's on for Philip Hammond despite a fall in public borrowing

 
Emma Haslett
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The Chancellor Of The Exchequer Leaves Downing Street To Present The 2017 Budget To Parliament
Hammond is due to deliver his Budget tomorrow (Source: Getty)

Pressure on Philip Hammond ramped up ahead of his Budget speech tomorrow, after official figures showed government borrowing increased in October - despite year to date borrowing falling to its lowest since 2007.

The Office for National Statistics (ONS) said public sector net borrowing rose to £8bn in October, up £500m on the same month last year.

However, the figures also showed borrowing in the year to date had fallen by £4.1bn to £38.5bn, the lowest figure since 2007.

Public sector net debt also rose, to £1.63bn, equivalent to 79.6 per cent of GDP, up £46.1bn on the same period last year. Stripping out public sector banks, that figure was £1.79bn, or 87.2 per cent of GDP, up £147.8bn on last year.

The data also showed the government spent £6bn on interest in October, the highest October payment on record - although it was still lower than the highest monthly payment on record.

Read more: Here's what Budget 2017 could mean for the UK housing market

Coming ahead of tomorrow's Budget, the figures are likely to put pressure on chancellor Philip Hammond, who is thought to be planning to avoid "big, bold" announcements.

Adam Chester, head of economics at Lloyds Bank Commercial Banking, said the year-to-date figure will provide limited wiggle room.

"Improvements to the public finances had given some room to ease policy, but that will be squeezed when the Office for Budget Responsibility revises down its growth forecasts on Wednesday," he said.

"There is a danger of undue celebration and the chancellor certainly shouldn't start jumping for joy just yet. Looking at the annual trend, we are still running a large deficit which means our national debt continues to grow," added Ross Campbell, public sector director at the ICAEW.

“The Budget will be an opportunity for government to work on bigger picture, otherwise fluctuating monthly figures will continue to distort the longer term view. Expected interest rate rises are an additional worry and Phillip Hammond needs a long term strategy that will address the scale of the problem. Over the next 12 months and beyond it is vital that we see a permanent shift in reducing the massive deficit.”

Read more: Thoughts ahead of the Budget

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