The Treasury borrowed more than expected last month to record the highest December sum for four years, official figures have shown, with higher debt interest payments adding to the bill.

The Office for National Statistics (ONS) reported a net borrowing figure for December of £17.8bn when a sum just above £14bn had been expected by economists.

It left public sector net borrowing £10.1bn up on the same month last year and £8.9bn higher than at the same point in the last financial year but still within the range expected by the Office for Budget Responsibility.

Borrowing is on the up amid a budget-led drive for public sector investment, but the ONS data showed an £8.3bn debt interest bill – the third-highest December total on record.

Money latest: UK mortgage rules could be about to change

The report said that higher bill was mainly explained by shifts in the rate of inflation linked to the borrowing.

A £1.7bn payment for the repurchase of military dwellings added to the total December figure.

The data was revealed as Chancellor Rachel Reeves attends the World Economic Forum in Davos for a series of meetings with global business leaders in a bid to showcase the UK.

There is a chill, however, around the UK’s immediate economic prospects with investors recently piling pressure on her stewardship of the public finances by demanding higher risk premiums to hold UK government debt in the form of bonds, known as gilts.

Read more:
UK long-term borrowing costs highest this century
Reeves to meet US financiers in Davos
Wage growth and jobless rate rising

Long-term borrowing costs hit highs not seen since 1998 earlier this month, with the 30-year UK gilt yield still above 5%.

It ticked up by eight basis points in the wake of the ONS report being released.

The first six months in charge of the public finances have proved a baptism of fire for the chancellor, who promised during the election campaign to make economic growth her top priority.

But she and the prime minister have been subsequently accused of shattering confidence through warnings of a “tough” budget ahead due to an alleged black hole in the public finances inherited from the Tories.

It was measured at £22bn and her fiscal statement on 30 October put business mainly on the hook for £40bn of tax increases announced.

The economy is estimated to have largely flatlined during the second half of last year, with major employers warning that investment, jobs and pay growth ahead are under threat to help offset the impact of the additional costs due from April when tax hikes, including from employer national insurance contributions, take effect.

They have also stated that higher prices for consumers will also form part of the mix.

Employment figures released on Tuesday suggested that firms were already taking action.

Data from HM Revenue & Customs showed the number of payrolled employees was estimated to have fallen by 47,000 during the 12 months to December – the biggest drop since November 2020.

Economists see economic growth being supported this year by public sector investment announced in the budget.

The big question mark is over the contribution from the private sector.

Jessica Barnaby, deputy director for public sector finances at the ONS, said: “At almost £18bn, borrowing last month was the third highest in any December on record.

“Compared with December 2023, spending on public services, benefits, debt interest and capital transfers were all up, while an increase in tax receipts was partially offset by a reduction in national insurance contributions, following the rate cuts earlier in 2024.”

Chief Secretary to the Treasury Darren Jones said of the data: “Economic stability is vital for our number one mission of delivering growth, that’s why our fiscal rules are non-negotiable and why we will have an iron grip on the public finances.

“Through our spending review we will interrogate every line of government spending for the first time in 17 years. We’ll root out waste to ensure every penny of taxpayer’s money is spent productively and helps deliver our Plan for Change.”

The chair of the UK’s competition regulator has been removed from his role by the government, amid its push for growth.

Marcus Bokkerink, the head of the Competition and Markets Authority (CMA), has been removed from his post by the business secretary.

Chancellor Rachel Reeves met with regulators last week to impress upon them the centrality of economic growth to their activities.

Money blog: Trump’s cryptocurrency crashes as critics call it worthless

The CMA oversees deal-making and briefly paused the high-profile merger of Microsoft and gaming giant Activision-Blizzard.

Mr Bokkerink, a former senior partner at one of the world’s biggest consulting firms, was appointed in 2022 by then business secretary Kwasi Kwarteng. He could have served a five-year term.

A government source told Sky News: “This is a signal that we’re serious about changing the culture of regulation in order to get growth. The government wants to show it is serious about investment.”

The removal of the CMA chief comes as Ms Reeves and business secretary Jonathan Reynolds, who took the decision, arrived in Davos to court overseas investors at the annual World Economic Forum.

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 us on WhatsApp and subscribe to our YouTube channel to keep up with the latest news.

It is no surprise to see a government that claims to be committed to making economic growth a priority giving the green light to expansion of Gatwick Airport and Luton Airport.

Nor, for that matter, would it be a surprise for a third runway at Heathrow Airport to be given the go-ahead by Sir Keir Starmer‘s government – particularly as Rachel Reeves, the chancellor, told the London Evening Standard in July last year that she had “nothing against expanding airport capacity… I want Heathrow to be that European hub for travel”.

Put in purely economic terms, airport expansion is a no-brainer.

Money blog: Trump’s cryptocurrency crashes as critics call it worthless

The economic case

The independent commission led by Sir Howard Davies, the former chairman of NatWest, and published as long ago as July 2015, concluded that “expanded airport capacity is crucial for the UK’s long-term prosperity”.

Gatwick, according to a report prepared for the airport by the independent economic consultancy Oxera, generated £5.5bn for the economy in 2023 and supported more than 76,000 jobs.

The airport’s owner estimates that expanding it to take annual capacity to 75 million by the mid-2030s, up from the £46.5m it hit in 2019, would create around 14,000 jobs and generate an extra £1bn a year in economic benefits.

Those numbers are difficult to verify – but it can be stated with confidence that anything which provides access to new markets for both consumers and businesses will be positive for growth.

Expanding the smaller Luton Airport would, similarly, be positive for growth.

Read more:
Water boss blames 15 years of keeping bills low for industry woes
Wage growth and jobless rate rising, official figures show

The airport in 2019 – these pre-pandemic numbers are probably the most reliable given the upheaval of the last few years – is estimated to have supported 16,500 jobs in the local area and contributed £1.1bn to GDP. Expansion on the airport’s estimates creates up to 6,100 jobs and contributes an extra £900m to GDP.

Trumping them both, of course, is Heathrow.

The Davies Commission said that building a third runway to the northwest of the airport would provide for around 40 new destinations from Heathrow and would create more than 70,000 new jobs by 2050, adding some £147bn to GDP.

It stated: “Heathrow is best-placed to provide the type of capacity which is most urgently required: long-haul destinations to new markets. It provides the greatest benefits for business passengers, freight operators and the broader economy.”

It is worth noting that among the members of the commission was Sir John Armitt, the respected former chairman of the Olympic Delivery Authority, who is now chair of the National Infrastructure Commission.

His term of office was extended by Ms Reeves in October last year in order for him to oversee the 10-year strategy ordered by the chancellor and the establishment of the National Infrastructure and Service Transformation Authority.

He will be an influential voice in this debate.

However, while the economic case for airport expansion is unimpeachable, the bigger question, perhaps, is whether it is achievable.

Political considerations

Getting approval for the expansion of both Luton and Gatwick will be a major test of the new government’s commitment to overhauling planning regulations where they are an impediment to growth.

And here there are – for supporters of expansion – ominous signs.

A decision on whether or not to expand Luton was postponed for the third time just before Christmas so that Heidi Alexander, who had just succeeded the disgraced Louise Haigh as transport secretary, could be given time to assess the application.

Climate concerns

Tied into the planning hurdles are the inevitable environmental objections.

The Climate Change Committee, the government’s independent advisory body, has already said emissions savings would have to be made elsewhere in the economy were there to be a big expansion in airport passenger numbers.

The aviation industry will doubtless argue that it has already committed to becoming net zero by the middle of the century – but the environmental lobby has a long track record of successfully campaigning against airport expansion.

On top of that are the political obstacles.

Ms Reeves – and Ms Alexander, should she back expansion of Gatwick and Luton – will face implacable opposition from within their own cabinet, not least from Ed Miliband, the energy and climate change secretary.

Backing Heathrow expansion would be more controversial still.

Sadiq Khan, the London mayor, is strongly opposed to this and so are other senior Labour figures, among them Andy Burnham, the mayor of Greater Manchester.

He argues that a third runway at Heathrow would run counter to levelling-up proposals – although it is worth noting here that some of the UK’s biggest regional airports, such as Newcastle, support a third runway on the basis that it would boost international connectivity to their region.

That means leadership will ultimately have to come from Sir Keir Starmer who, it is worth noting, voted against a third runway at Heathrow in 2018.

Government unlikely to ever get credit

Supporting airport expansion is often difficult for governments – quite apart from the environmental objections and the inevitable planning hurdles – because it takes so long to add capacity and ministers are therefore unlikely to receive credit for it during their political lifetime.

For example, the two main airport expansion projects currently under way in Europe, the new Luis de Camoes airport in Lisbon and the new Solidarity superhub in Warsaw, are unlikely to be completed until the mid-2030s.

But the latter, in particular, highlights how other European governments have no hesitation in seeing airport expansion as a major generator of growth.

It is not alone. Amsterdam’s Schiphol Airport, an increasingly important competitor to Heathrow, is currently investing some €6bn in upgrades with the aim of expanding both passenger and flight numbers. Budapest, an airport once owned by BAA, the former parent of Heathrow and Gatwick, is looking to build a third terminal that would generate an extra three million passengers by the end of the decade.

These examples highlight how other European governments are less squeamish about putting airport expansion over environmental considerations in the name of pursuing economic growth.

You can be sure that the international investors who own Heathrow, Gatwick and Luton will be looking to the UK to do likewise.