Public borrowing in the UK surged more than expected in December, putting additional pressure on Prime Minister Keir Starmer and his Labour government as they face economic challenges.
According to official data released on Wednesday, public-sector borrowing reached £17.8 billion ($21.9 billion) last month, marking a £10 billion increase compared to December 2023, the Office for National Statistics (ONS) reported.
“This was the third-highest borrowing figure for any December on record,” said Jessica Barnaby, deputy director for public-sector finances at the ONS.
The data intensifies the pressure on Chancellor of the Exchequer Rachel Reeves to reassure financial markets that her policies of tax increases and higher borrowing to fund investments will support the government’s goal of fostering economic growth. This comes amid a slump in the pound and a temporary surge in UK government bonds (gilts), as markets react to a struggling UK economy and rising global bond rates.
“Market interest rate expectations and gilt yields are still higher than when the budget was announced, which suggests that the chancellor’s fiscal space has been reduced,” noted Alex Kerr, UK economist at Capital Economics. “With a weakening economy, this may force the chancellor to raise taxes or cut spending in the upcoming fiscal statement.”
The fiscal rules outlined in the government’s initial budget aim to balance day-to-day spending with revenue, avoiding excessive borrowing. Darren Jones, a senior Treasury official, emphasized, “Economic stability is crucial to our primary goal of delivering growth. That’s why our fiscal rules are non-negotiable, and we will maintain strict control over public finances.”
The ONS attributed the increase in borrowing to higher spending on public services, benefits, and interest on national debt. The UK’s fiscal watchdog, the Office for Budget Responsibility, is set to release its forecast for the financial year on March 26, which will assess whether the government is adhering to its borrowing targets.
Labour returned to power in July, following 14 years of Conservative leadership.
