In October 2024, the UK government borrowed £17.4 billion, significantly surpassing the anticipated £12.3 billion, marking the second highest October borrowing since records began in January 1993.

This surge in borrowing was largely driven by an increase in debt servicing costs, which reached £9.1 billion, accounting for over half of last month's borrowing due to higher inflation impacting repayment rates on index-linked gilts.

The Office for National Statistics reported that government spending, including services and debt repayments, rose at a faster rate than tax receipts, contributing to the overall borrowing increase.

Tax receipts did see an increase of £2.9 billion to £61.3 billion, primarily from rises in Corporation Tax and Income Tax, but overall spending also rose by £3.9 billion to £88.5 billion.

Darren Jones, Chief Secretary to the Treasury, emphasized the government's commitment to stabilizing public finances, particularly in light of the £22 billion deficit inherited from the previous administration.

Public sector net debt has now reached 97.5% of GDP, a level not seen since the early 1960s, while new measures indicate a debt of 83.7% of GDP.

Despite cuts to national insurance contributions, expected drops in tax receipts did not materialize, leading to a growing gap between revenue and public spending.

Chancellor Rachel Reeves faces pressure from these disappointing borrowing figures, which may necessitate further tax increases to support government spending in future years.

Economic experts suggest that fiscal policy will continue to tighten, indicating that Reeves may need to implement additional tax increases if revenues fall short or spending exceeds expectations.

The Office for Budget Responsibility forecasts that the deficit will increase further this year to £127.5 billion.

In response to inflationary pressures, Chancellor Reeves announced £9.4 billion in pay deals, which included backdated pay rises for teachers and NHS staff starting in October.

Overall, the financial landscape presents significant challenges for the UK government as it seeks to balance increased spending with the need to manage rising debt levels.