Government borrowing remains at highest since pandemic
Government borrowing is at its highest since the pandemic due to public sector pay rises and the high cost of borrowing, official figures show.
Last month had the third-highest September borrowing on record, coming only behind 2020 and 2021, according to data from the Office for National Statistics (ONS).
While more money came in from tax, it was outweighed by increased spending which the ONS said was partly due to higher interest rates on the debt and public sector pay rises.
Spending was £2.1bn higher in September than the same month a year ago, figures showed.
Public sector workers including teachers and junior doctors have accepted pay rises since Labour entered government in July while high interest rates set by the Bank of England to bring down inflation have made borrowing more expensive.
Money blog: Gold prices rocket to record high – why?
But the gap between what the government took in and what it spent was less than expected by some.
Economists polled by the Reuters news agency had anticipated public sector borrowing could have reached £17.5bn but was in fact £16.6bn. The sum excludes borrowing by public sector banks.
Independent forecasters at the Office for Budget Responsibility (OBR), however, had not thought such a rise was likely. The numbers came in £1.5bn higher than it had forecast.
The amount paid out in benefits fell by £2bn as the automatic winter fuel payment for pensioners was cut and one-off cost of living payments ended. While the benefit is not paid until November the payments and eligibility are determined in September.
What are the government saying?
The chief secretary to the Treasury Darren Jones defended the pay rises by saying strikes would cost the economy more.
Keep up with all the latest news from the UK and around the world by following Sky News
“Strikes cost at least £3bn last year, so it was the right thing to do to end those damaging disputes,” he said.
“We have inherited a £22bn black hole in the country’s public finances, including no plan to fund pay deals for millions of public sector workers… Resolving this blackhole at the budget next week will require difficult decisions to fix the foundations of our economy and begin delivering on the promise of change.”
Donald Trump’s victory was secured on an unequivocal promise to stretched American households that he would “end inflation”, but markets and economists are anticipating his second term will do the opposite.
A combination of corporate tax cuts, government borrowing, lower migration and swingeing tariffs on overseas imports are all expected to heat up the American economy and stoke price rises.
Bond yields on 10-year US Treasuries, effectively the price of borrowing for the American government, were up by 3.6% overnight, rising more than 15 basis points to above 4.4% as European markets opened.
That signals investors believe that borrowing will rise, and the Federal Reserve will be forced to slow rate cuts in order to tackle inflation.
US election latest: Trump beats Kamala Harris in race to White House
Money latest: The market winners and losers after Trump’s win
A clearer picture will emerge on Thursday when Federal Reserve chairman Jay Powell, who Mr Trump said will not be reappointed, announces the next move on rates.
Markets still expected a 0.25 percentage point cut (a similar move to that anticipated from the Bank of England earlier in the day) but Mr Powell’s comments will be scrutinised for signals of what Trump 2.0 means for the prospect of further cuts.
Please use Chrome browser for a more accessible video player
Trump wins: Demographics and key issues
But higher prices for consumers are not necessarily bad news for corporate America, with the dollar surging against sterling and the euro as swing states fell to Mr Trump, and Wall Street futures trading indicating a rally when they reopen with him confirmed as president-elect.
Shares in US banks were boosted with J.P. Morgan, Goldman Sachs and Morgan Stanley all up more than 6% in pre-market trading, along with Tesla, boosted by more than 13% as markets anticipate a dividend for Elon Musk’s campaign-trail support.
Keep up with all the latest news from the UK and around the world by following Sky News
Defence stocks were higher too and not just in the US – BAE Systems and Rolls Royce were both up – reflecting likely pressure on America’s NATO allies to make good on their commitments to increase spending.
Bitcoin was also positive in anticipation of a more benign regulatory environment from a president who used the campaign platform to launch his own cryptocurrency.
By contrast renewable holdings, the target of much of Joe Biden’s economic stimulus, were in negative territory, with wind and solar priorities likely to be replaced by a pledge to “drill baby, drill”.
Of most concern to America’s trading partners and allies will be Mr Trump’s promise to erect barriers to free trade.
The man who said tariffs “is the most beautiful word in the world” has pledged a 60% levy on Chinese imports and 10% on those from elsewhere, a deeply protectionist move that could trigger a trade war with China and the EU.
These can only increase prices in the US, with importers paying the levies at the point of entry, and other trading blocs likely to respond in kind.
Read more on Trump’s victory:
How worried should we be about Trump’s second presidency?
Dollar surges amid Trump victory
The EU has already imposed its own 35% tariff on Chinese EVs to the dismay of the continent’s carmakers the measure is intended to protect.
While these tensions play out, post-Brexit Britain, a relatively small player outside the major trading blocs, is likely to be a spectator.
Post Office campaigner Sir Alan Bates is yet to receive a reply from Sir Keir Starmer, despite writing to him over a month ago.
Sir Alan said he had written to the prime minister to remind him the “clock is still ticking” on a financial redress deadline for victims.
In his letter, he demanded a March 2025 deadline for compensation for sub-postmaster victims of the Horizon scandal.
Sir Alan confirmed to Sky News he was yet to hear back from the prime minister.
Keep up with all the latest news from the UK and around the world by following Sky News
“It was over a month ago,” he said.
“I sent him a reminder yesterday. I told him the clock is still ticking and it’s now five months from the March deadline, which I’m told is still achievable by other professionals.
“So let’s get on with it, that’s all we want. Get on with it.”
This breaking news story is being updated and more details will be published shortly.
Please refresh the page for the fullest version.
You can receive breaking news alerts on a smartphone or tablet via the Sky News app. You can also follow @SkyNews on X or subscribe to our YouTube channel to keep up with the latest news.
-
Sports2 years ago‘Storybook stuff’: Inside the night Bryce Harper sent the Phillies to the World Series
-
Sports7 months agoStory injured on diving stop, exits Red Sox game
-
Sports2 years agoMLB Rank 2023: Ranking baseball’s top 100 players
-
Sports1 year agoGame 1 of WS least-watched in recorded history
-
Environment1 year agoJapan and South Korea have a lot at stake in a free and open South China Sea
-
Sports3 years ago
Team Europe easily wins 4th straight Laver Cup
-
Environment2 years agoGame-changing Lectric XPedition launched as affordable electric cargo bike
-
Business2 years agoBank of England’s extraordinary response to government policy is almost unthinkable | Ed Conway