UK government records £24.5bn September deficit ahead of Healey’s first budget

Debt interest sets September record as total debt is estimated at £3tn

John Healey will announce his first budget on 28 October. Official figures put both September borrowing and borrowing for the financial year to date above Office for Budget Responsibility forecasts, while debt interest reached the highest September level on record.

Office for National Statistics figures showed that the Treasury ran a £24.5bn deficit on the public finances in September. The total was up from £17bn in August and £1.9bn above the independent Office for Budget Responsibility’s forecast. The Guardian said the figures increased pressure on John Healey before his first budget on 28 October.

Public sector net borrowing for the financial year to date totaled £97.8bn, according to the Office for National Statistics. The cumulative amount was £4.4bn lower than a year earlier but remained £6bn above what the Office for Budget Responsibility expected.

The UK government paid £10.9bn in debt interest during September, the highest amount recorded for the month. The payment was only the eighth time the monthly debt-interest figure had exceeded £10bn.

Some government bonds are directly linked to the Retail Prices Index, an inflation measure, and payments on those bonds rise with the index. The Guardian said the index had increased in recent months as the Iran war pushed up energy costs. The Office for National Statistics said the increase added £4bn to debt-interest costs in September alone.

The Guardian said the broader data underlined the Iran war’s impact on the public finances before the budget. Higher energy costs fed into inflation, which increased payments on some government debt.

Separately from the monthly interest cost, the Office for National Statistics estimated that total government debt had reached £3tn for the first time. The debt’s share of the economy fell to 94%, from 95% a year earlier.

John Healey has stressed his determination to remain within the fiscal rules set out by his predecessor as chancellor, Rachel Reeves. However, he is widely expected to accept a slimmer financial buffer, or headroom, against those rules than the £24bn Reeves had built at the time of her spring forecast.

The Guardian also noted that higher inflation tends to be good for tax revenues but squeezes how much government departments can achieve within fixed budgets.