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August Public Sector finances "will likely necessitate difficult decisions in the forthcoming Budget"

ended 20. September 2024

According to official data published this morning, borrowing - the difference between public sector spending and income - was £13.7 billion in August 2024, £3.3 billion more than in August 2023 and the third highest August borrowing since monthly records began in January 1993. Newspage asked economists and market experts for their verdicts, below.

3 responses from the Newspage community

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Editor
Gabriel McKeown
Head of Macroeconomics at Sad Rabbit - Substack Newsletter
As public sector net debt climbs to levels not seen since the swinging '60s, the future of the UK economy hangs in the balance. The latest figures on government borrowing paint a stark picture of the nation's fiscal health and reflect the ongoing pressures on public finances. These elevated borrowing levels underscore the government's struggle to balance spending with income amidst rising costs and economic uncertainties. This will likely necessitate difficult decisions in the forthcoming Budget, with the need to rein in borrowing without stifling the economic recovery being paramount. Inheriting a substantial fiscal deficit, Chancellor Reeves now faces the formidable challenge of addressing this financial shortfall without exacerbating the situation further. However, in a storm of rising costs and economic uncertainty, stabilising public finances is not just important, it’s vital for reigniting rapidly depleting confidence.
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John Choong
Head of Equities and Markets at Interpretiv
August's borrowing figures paint a grim picture for the Chancellor, tightening the screws on her upcoming Budget. The anticipated windfall from self-assessment (SA) tax receipts failed to materialise, stagnating at £1.5bn — a mirror image of last year's take. July and August's combined SA receipts fell £1.0bn short of the OBR's £15.4bn forecast. However, the saving grace remains that cumulative borrowing is £6.3bn lower than the OBR's March estimate, as the Bank of England's QT programme has helped to reduce interest costs through fewer bonds in circulation. However, any fiscal breathing room gained from QT could be swiftly eroded by another shortfall in next month's figures. As such, Reeves now faces a high-stakes fiscal juggling act, as she must craft a Budget that walks the tightrope between fiscal prudence and economic stimulus, all while navigating the choppy waters of underperforming tax revenues and a consumer losing confidence.
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David Belle
Founder and Trader at Fink Money
The first thing to ask is, 'what black hole'? Not only could the 'black hole' be fixed by interest rate normalisation (lower rates lead to lower debt servicing costs), but you'd have to ask what the furore over it was according to these figures. Our deficit spending is 4.4% of GDP, lower than the US, France, Japan, Italy et al. These are high. But the issue with UK spending is that it seems to be growth negative. The UK lacks a pro-growth policy, not spending. In this regard, yes the deficit and debt spending is something to be concerned about because it is not changing the denominator positively in the deficit/gdp equation.