The British government borrowed more than expected in October as debt interest payments pushed the budget deeper into deficit and increased pressure on Rachel Reeves to boost economic growth.
Borrowings rose to £17.4bn last month, the second highest October figure since monthly recording began in 1993.
City economists had expected October's figure to be lower at around £12.3bn, after the UK borrowed more than £16bn in September.
The Office for National Statistics (ONS) announced that net public sector borrowing rose by £1.6bn compared to the same month last year.
In a further blow to Reeves' efforts to stimulate the economy and bring down debt levels, figures showed monthly central government debt interest rose to £9.1bn, a record high for October.
Alex Kerr, an economist at consultancy Capital Economics, said the “disappointing” figures highlighted the fiscal challenges facing the chancellor.
He said Reeves had downplayed the possibility of further tax increases, but that “if we want to increase everyday spending in the future, we may need to raise taxes to pay for it.”
The ONS said the expected drop in tax revenue from two major cuts to National Insurance contributions had not materialized. “However, spending overall grew faster than revenues last year as spending on public services, benefits, and debt interest all increased,” the report said.
The increase in debt service payments in October was mainly due to a rise in the retail price index of inflation, which determines the repayment rate of inflation-indexed bonds.
Treasury Secretary Darren Jones said: “We inherited a £22bn black hole in public finances from the previous government. We tackled this in our Budget, repairing the foundations and putting public finances on a sustainable footing as we look to rebuild the country. .
“This government is not going to play fiscal laxly. Our new strong fiscal rules will bring stability by reducing debt while prioritizing investment to deliver growth.”
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Matt Swannell, chief economic adviser at EY Item Club, said: “Despite the changes announced in the Budget, fiscal policy is likely to remain tight over the next few years.”
“Furthermore, the Prime Minister has not left any of himself [wriggle] She has room to violate her own fiscal rules and may need to raise taxes further in the future if they fail to meet expectations or increase spending.
“Indeed, if the rise in market interest rates since the Budget is sustained, the government's fiscal headroom will already be shrinking.”
