Second highest level on record for public sector borrowing, interest payments on government debt rise, and going back on foreign aid commitments from Cameron.
UK public sector borrowing last month rose to its second highest level on record for the month of October. The latest set of data indicates that public sector net borrowing increased to £14.9bn over the month (excluding banks), further feeding into a deficit which stands just shy of £100bn in the financial year to October.
While this period has seen an additional £21.9bn borrowed when compared against the same seven-month period last year, it is nonetheless £16.9bn less than the £115.2 billion projected by the OBR during March 2023.
As such, some are suggesting that since the Treasury has borrowed less than the OBR forecast, Hunt will be buoyed by the data ahead of tomorrow’s budget giving him more room
for manoeuvre. Last week, Hunt indicated that he would like to set out a path to reduce taxation. Such sentiments came ahead of Sunak’s comments yesterday that taxes ought to be cut in a “responsible way” and that the government could now move to the “next phase” vis-à-vis economic growth. During tomorrow’s address to the Commons, it is widely considered that Hunt will seek to reduce the tax burden on households and businesses as it currently stands at its highest level in 70 years. Nevertheless, public sector net borrowing still came in above the general market consensus and is indicative that the treasury continue to face headwinds in shoring up the nation’s finances. As such, yesterday the director of the IFS think tank said that No.11 can only afford “a tiny tax cut here or a tiny cut there”.
Looking further into the Public Sector Net Borrowing, the ONS noted that interest payable on government debt rose from £6.4bn in October 2022 to £7.5bn last month. This was “the highest interest payable in any October since monthly records began in April 1997” and was £2.6bn more than the OBR’s March 2023 forecast.
Elsewhere, central government’s total expenditure was just under £100bn for October – representing an increase of some £13.7bn from October 2022. Tax receipts meanwhile were £76.9bn – representing an increase of £2.5bn from last year and £1.5bn more than the OBR forecast.
Yesterday Lord Cameron appeared to dial back on his previous commitment to spend 0.7% of UK GNI on foreign aid. This commitment previously formed one of the Conservatives flagship policies under the then Prime Minster Cameron, having been written into law in March 2015. This milestone marked the first time a country in the G7 had written such a commitment into law at a time when only five other countries (Sweden, Norway, the UAE, Denmark and Luxembourg) meet the commitment laid out by the UN in 1970.
The commitment was then downgraded in 2020 under the then Chancellor Rishi Sunak, as No.11 looked for ways to cut spending during the pandemic. Under the new arrangement, the UK would spend 0.5% of GNI on international aid and development, with the intention of returning to 0.7% when the government’s finances was in a healthier position. This resulted in Cameron criticising the Johnson administration in abandoning the conservative’s pledge and hitherto legal requirement.
However, with Cameron back in cabinet and subject to the bounds of collective responsibility, the foreign secretary yesterday said that foreign aid should ‘adapt to new realities’. This came as Cameron, Andrew Mitchell and the FCDO published a white paper titled “international development in a contested world: ending extreme poverty and tackling climate change” which did not alter the preconditions for raising foreign aid back up to Cameron’s flagship 0.7% level. Cameron’s foreword in the white paper also stated how “we are off track” on the 2015 sustainable development goals with over 700 million people remain in extreme poverty.
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