Jessica Barnaby, ONS deputy director for public sector finances, said: “This month’s borrowing was the second highest October figure since monthly records began in January 1993.
“Despite the cut in the main rates of national insurance earlier in 2024, total receipts rose on last year.
“However, with spending on public services, benefits and debt interest costs all up on last year, expenditure rose faster than revenue overall.”
Not since the pandemic year of 2020 when the furlough scheme was in operation was there a gap as big between state income and spending.
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It’s down to hikedinterest rates. Government borrowing also grew more expensive in the weeks running up to the US election.
Uncertainty over who would become the next US president and what would be announced in the budget brought up the rate the UK had to pay on its bonds – a form of debt states issue to raise funds.
Many of the public sector pay rises announced by the new Labour government also took effect last month.
Another contributing factor was spending on public services and benefits, the ONS said, which increased faster than increased tax takes.
Tax revenues also rose, despite national insurance cuts – just not as fast as spending.
It will be unwelcome news for Chancellor Rachel Reeves who has committed to reduce debt, “fix” the foundations of the economy and increase spending.
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Chancellor to rewrite fiscal rules
The public sector finance announcement is the first since her October budget.
Government outflows are unlikely to fall anytime soon with the budget anticipated to up spending by about £70bn over the next five years, according to analysis by independent forecasters the Office for Budget Responsibility (OBR).
When measured as a percentage of GDP, which tracks everything produced in the economy, debt was at 1960s levels.
The return on Donald Trump to the G7 was always going to be unpredictable. That it is happening against the backdrop of an escalating conflict in the Middle East makes it even more so.
Expectations had already been low, with the Canadian hosts cautioning against the normal joint communique at the end of the summit, mindful that this group of leaders would struggle to find consensus.
Canadian Prime Minister Mark Carney carefully laid down an agenda that was uncontroversial in a bid to avoid any blow-ups between President Trump and allies, who of late have been divided like never before – be it over tariffs and trade, Russia and Ukraine, or, more recently Israel’s conduct in Gaza.
But discussions around critical minerals and global supply chains will undoubtedly drop down the agenda as leaders convene at a precarious moment. Keir Starmer, on his way over to Canada for a bi-lateral meeting in Ottawa with PM Carney before travelling onto the G7 summit in Kananaskis, underscored the gravity of the situation as he again spoke of de-escalation, while also confirmed that the UK was deploying more British fighter jets to the region amid threats from Tehran that it will attack UK bases if London helps defend Israel against airstrikes.
Image: Canadian PM Mark Carney is greeted by President Donald Trump at the White House in May. Pic: AP
Really this is a G7 agenda scrambled as world leaders scramble to de-escalate the worst fighting between Tel Aviv and Tehran in decades. President Trump has for months been urging Israel not to strike Iran as he worked towards a diplomatic deal to halt uranium enrichment. Further talks had been due on Sunday – but are now not expected to go ahead.
All eyes will be on Trump in the coming days, to see if the US – Israel’s closest ally – will call on Israel to rein in its assault. The US has so far not participated in any joint attacks with Tel Aviv, but is moving warships and other military assets to the Middle East.
Sir Keir, who has managed to strike the first trade deal with Trump, will want to leverage his “good relationship” with the US leader at the G7 to press for de-escalation in the Middle East, while he also hopes to use the summit to further discuss the further the interests of Ukraine with Trump and raise again the prospects of Russian sanctions.
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“We’ve got President Zelenskyy coming so that provides a good opportunity for us to discuss again as a group,” the PM told me on the flight over to Canada. “My long-standing view is, we need to get Russia to the table for an unconditional ceasefire. That’s not been really straightforward. But we do need to be clear about what we need to get to the table and that if that doesn’t happen, sanctions will undoubtedly be part of the discussion at the G7.”
Image: Prime Minister Sir Keir Starmer (R) is greeted by Mark Carney as he arrives in Ottawa ahead of the G7
But that the leaders are not planning for a joint communique – a document outlining what the leaders have agreed – tells you a lot. When they last gathered with Trump in Canada for the G7 back in 2018, the US president rather spectacularly fell out with Justin Trudeau when the former Canadian president threatened to retaliate against US tariffs and refused to sign the G7 agreement.
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Since then, Trump has spoken of his desire to turn Canada into the 51st state of the US, a suggestion that helped catapult the Liberal Party beyond their Conservative rivals and back into power in the recent Canadian elections, as Mark Carney stood on a ticket of confronting Trump’s aggression.
With so much disagreement between the US and allies, it is hard to see where progress might be made over the next couple of days. But what these leaders will agree on is the need to take down the temperature in the Middle East and for all the unpredictability around these relationships, what is certain is a sense of urgency around Iran and Israel that could find these increasingly disparate allies on common ground.