Govt borrows higher-than-expected £10.6bn

Public sector borrowing jumped 14.5% over September 2015
Public sector borrowing jumped 14.5% over September 2015

The UK’s public finances were in worse shape last month as the Government surprised economists by borrowing a higher-than-expected £10.6 billion.

The Office for National Statistics (ONS) said public sector net borrowing, excluding state-owned banks, jumped 14.5% in September compared with the same month in 2015.

Economists were pencilling in a figure of £8.5bn.

It came as Government borrowing, excluding banks, for the financial year to date - April to September - fell by £2.3bn to £45.5bn, compared with the same six months in 2015.

It means Chancellor Philip Hammond can only borrow £10bn for the entire second half of the financial year if he is to meet the latest Office for Budget Responsibility’s (OBR) forecast of £55.5bn for 2016/17.

Mr Hammond said the Government was “committed to fiscal discipline” and would balance the books over a “sensible period of time” that would allow it to support the economy.

“We have already made significant progress in bringing the public finances under control, reducing the deficit by almost two-thirds since 2010, but our debt and deficit remain too high,” he said.

September’s rise in Government borrowing was driven by an increase in net borrowing from central and local government, which stepped up by £1.3bn and £300 million respectively.

The ONS said tax receipts rose 2.6% to £49bn last month, compared with September 2015.

However, the Government’s coffers were hit by an 8.7% drop in corporation tax receipts to £2.3bn, while VAT receipts grew at their slowest pace for September since 2012, lifting 1.4% to £11.1bn.

A rise in Government spending also put pressure on the UK’s finances, climbing 4.3% to £57.2bn over the period.