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Public sector finances, UK: October 2024: "Is there a StepChange.org for countries?"

ended 21. November 2024

Borrowing – the difference between public sector spending and income – was £17.4 billion in October 2024, £1.6 billion more than in October 2023 and the second highest October borrowing since monthly records began in January 1993, according to official data published this morning. One expert said “stagflation looms” as a result of these figures and that “these trends suggest increasing fiscal pressure that could lead to a depreciation of the Pound as investor confidence declines”. Another said simply: ”You don't need to be an economist to spot that figures are up across the board and this data looks grim. The Chancellor has taken measures to try and steady this ship, but the manner in which she's done it could lead to troublesome waters ahead. If an individual had this financial set up, namely laden with debt and continuing to borrow, robbing Peter to pay Paul, they would be pointed to the nearest debt management charity. Is there a StepChange.org for countries?"

5 responses from the Newspage community

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Ben Perks
Managing Director at Orchard Financial Advisers
You don't need to be an economist to spot that figures are up across the board and this data looks grim. The Chancellor has taken measures to try and steady this ship, but the manner in which she's done it could lead to troublesome waters ahead. If an individual had this financial set up, namely laden with debt and continuing to borrow, robbing Peter to pay Paul, they would be pointed to the nearest debt management charity. Is there a StepChange.org for countries?
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Tony Redondo
Founder at Cosmos Currency Exchange
Stagflation looms in the UK as public sector borrowing reached £17.4 billion in October 2024, up £1.6 billion from last year, the second highest October borrowing since 1993. The current budget deficit is £12.7 billion, indicating persistent challenges in public finances. Government debt interest payments hit £9.1 billion, the highest for October since 1997, straining future budgets and raising the likelihood of tax increases. Public sector net financial liabilities were estimated at 83.7% of GDP.
These trends suggest increasing fiscal pressure that could lead to a depreciation of the Pound as investor confidence declines. Rising debt and deficits will lead to speculation about tax hikes or spending cuts, dampening growth prospects. Yet, inflation shows CPI surpassing the BoE’s 2% target, likely delaying interest rate cuts. Consequently, the Pound will see more volatility as it fluctuates between support from higher UK interest rates and capital outflows amid deteriorating UK economy.
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Chris Barry
Director at Thomas Legal
A company would not be allowed to run their accounts like this so why are the government allowed to run the public finances in such an irresponsible way. It shows real lack of understanding when it comes to fundamental basics which is only borrow to fund growth, do not borrow to fund debt repayments or day to day spending. This stuff should be taught in primary school. The reality is, running the public sector is too expensive because so much of it is outsourced to the private sector on excessive contracts. This problem needs tackling first, then invest in growth.
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Dariusz Karpowicz
Director at Albion Financial Advice
The latest public sector finance data sends a concerning signal, with the initial optimism over falling inflation now overshadowed by escalating public sector costs. This deterioration in fiscal health suggests the UK economy remains on fragile ground, potentially undermining the Pound's recent stability. The combination of inflation-driven pay settlements and weakening fiscal metrics could pressure sterling, particularly against major currencies like the Dollar and Euro. This fiscal challenge, coming at a time when the UK economy is still navigating post-Brexit adjustments and global uncertainties, indicates that Britain's economic recovery remains precarious, with potential implications for both monetary policy and currency markets.​​​​​​​​​​​​​​​​
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Ken James
Director at Contractor Mortgage Services
Is this a Conservative hangover or Labour mismanagement? The woes of the UK have been firmly laid at the doorstep of the Conservatives but Labour can only play this card for a very short time frame and they are going to have to bring the UK economy back in check and fast. The Honeymoon period is over and the voters who backed them are starting to regret their decision.