Government borrowing leaps and retail sales drop by much more than expected
The latest official data on the state of the public finances and consumer spending makes for grim reading as the country awaits its next leader.
The Office for National Statistics (ONS) reported that public sector net borrowing came in at £20bn last month – £3bn more than economists had expected.
The report pointed to a record debt interest payment total of £7.7bn for the month of September – much of which could be attributed to rising inflation as a quarter of payments on the £2.4trn debt mountain are linked to the RPI measure.
Government spending increased by £5.8bn to £79.3bn as a result of the jump in interest, the ONS said.
It separately revealed that retail sales volumes fell 1.4% on the previous month, meaning that “consumers were now buying less than before the pandemic”.
The decline was far worse than the 0.5% decline that economists had forecast.
It was likely to reflect not only the deteriorating cost of living crisis that has squeezed consumer budgets this year but also the impact of store closures for the funeral of the Queen.
Many retailers closed their stores out of respect for the Queen on the day of her state funeral on 19 September
The borrowing figures cover the start of Kwasi Kwarteng’s short and turbulent tenure as chancellor.
He was appointed on 6 September before being fired weeks later following the market chaos that followed the tax giveaway mini-budget on 23 September.
While the contentious measures have now been largely overturned by the new Chancellor Jeremy Hunt, the backlash temporarily raised the interest rate demanded by investors to hold UK government debt.
That has fed into fixed rate mortgage costs.
Much of the borrowing – the second-highest September total on record – came while Kwasi Kwarteng was chancellor
It also led to the pound falling to a record low against the US dollar – with continued sterling weakness adding to the country’s import costs and therefore inflation.
The chancellor’s medium-term fiscal plan, due on Halloween, will aim to restore market confidence in the UK’s public finances.
But it will now fall under the oversight of a new PM following the resignation of the ill-fated mini-budget’s architect, Liz Truss.
The Tories expect their new leader to be in place in a week’s time – days before Mr Hunt is due to outline how he plans to balance the books while also maintaining a measure of support for struggling households and businesses.
A survey by the City watchdog found that almost 32 million people, or 60% of adults, were already finding it a heavy burden or somewhat of a burden to pay their bills because of the growing cost of living crisis.
The Financial Conduct Authority’s financial lives survey, which was taken between February and June, said the total was up six million from 2020, when the economy went into lockdown to fight the COVID-19 pandemic.
Another closely watched survey, compiled by GfK, found that confidence among British consumers remained close to the lowest level on record last month.
The chancellor said in the wake of the ONS data: “Strong public finances are the foundation of a strong economy.
“To stabilise markets, I’ve been clear that protecting our public finances means difficult decisions lie ahead.
“We will do whatever is necessary to get drive down debt in the medium term and to ensure that taxpayers’ money is well spent, putting the public finances on a sustainable path as we grow the economy.”
Baroness Michelle Mone has broadened her attack on her political critics, accusing Conservative leader Kemi Badenoch of using “inflammatory” and “reckless” language that could prejudice a police investigation into her role in the awarding of PPE contracts.
A day after she wrote to Sir Keir Starmer, accusing the government of pursuing a vendetta against her, the former Conservative peer responded to comments by Ms Badenoch following a High Court ruling that a company linked to Baroness Mone’s husband must repay £122m received for surgical gowns.
The court found that PPE Medpro, founded by her husband Doug Barrowman, was in breach of contract with the Department of Health and gave it two weeks to repay the sum.
While not a director of the company, Baroness Mone used her political contacts to introduce PPE Medpro to the government’s “VIP fast-lane” at the start of the pandemic, and a family trust of which her children are beneficiaries received £29m of the profits.
A separate criminal investigation by the National Crime Agency (NCA) is ongoing, and assets linked to the couple worth £75m have been frozen while it continues.
In a series of radio interviews, Ms Badenoch criticised Baroness Mone, accusing her of bringing shame on the Conservative Party and calling for her to step down from the House of Lords.
“Where people do wrong, they should be punished,” she said. “They should face the full force of the law and this is something that I very strongly believe in,” she said.
“And as the prosecution against her continues, they should throw the book at her for every single bit of wrongdoing that has taken place.”
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Baroness Mone ‘should resign’
In a letter from her private office, Baroness Mone accuses the Tory leader of being ignorant of the facts and calls out a series of other Conservative politicians who introduced companies to the VIP lane.
“I was shocked to the core to read about your inflammatory language on BBC Radio yesterday calling for me to resign from the House of Lords,” she writes.
“You are commenting on a live criminal investigation that could prejudice the outcome of any trial, and in so doing, you are reportable to the attorney general for breach of and contempt of court. Does no one ever tell you these things before you and your colleagues make reckless statements in the public domain?”
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Baroness Mone goes on to say the NCA investigation has “nothing to do with PPE Medpro and the contracts”.
“The case theory of the NCA investigation is that I somehow misled the Conservative government about my alleged concealed involvement and ended up pocketing a lot of money,” she writes. “Well I’m sorry to disappoint you, but it isn’t true.”
She also says the Conservative government knew of her involvement and names former health secretary Matt Hancock, Lord Agnew, Lord Feldman and Lord Chadlington as being among 51 “mostly Conservative peers and MPs” who introduced providers to the VIP lane.
“So Kemi, my role was exactly the same as all other Conservative MPs and peers who were trying to help provide PPE… if I have done wrong, then so have all the others in the VIP lane. In which case, you should be calling out for them to resign as well. That’s if you manage to work out what it is they are supposed to have done wrong.”
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The High Court says a company linked to Mone breached a government contract of nearly £122m
She concludes by saying she has no wish to rejoin the Lords as a Conservative peer when her leave of absence ends, “that’s assuming there still is a Conservative Party before the next General Election”.
The letter comes as an online petition calling for Baroness Mone to step down from the Lords, launched by the Covid-19 Bereaved Families for Justice, attracted 60,000 signatures in 24 hours.
The Conservative Party has been approached for comment.
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