Public finances worsen ahead of today’s Budget

The UK’s public finances unexpectedly worsened last month, piling further pressure on Chancellor Philip Hammond who is facing a potential growth downgrade in the Autumn Budget.

The Office for National Statistics said public-sector net borrowing, stripping out state-owned banks, jumped £500 million to £8 billion last month.

The move was above economists’ predictions of £7.5bn, as debt interest payments hit a record high of £6bn for the month.

Despite October’s rise, the deficit excluding state-backed banks for the current financial year — April to October — hit the lowest level for a decade, dropping £4.1bn to £38.5bn.

The update comes as Mr Hammond braces for the prospect of a gloomy fiscal outlook in today’s Budget, with forecasts expected to show lower economic growth and higher borrowing.

Samuel Tombs, chief UK economist at Pantheon Macroeconomics said: “Public borrowing rose yearover-year in October, despite ongoing austerity measures, primarily because interest payments leapt by £1.2bn. Interest payments on indexlinked gilts jumped, due to the rise in inflation.”

However, the Chancellor still remains on track to undershoot the Office for Budget Responsibility’s current forecast of £58.3bn for the financial year ending in March 2018.