UK borrowing hits £18.3bn in August before budget

UK public borrowing was £18.3 billion in August, almost 20 percent higher than a year earlier, the Office for National Statistics said.

The figures come before an October 28 budget presentation by Finance Minister John Healey, with Prime Minister Andy Burnham’s Labour government facing inflation, higher bond yields and pressure over the cost of living.

Since the start of the fiscal year in April, public borrowing has reached £77.3 billion. That was slightly lower than a year earlier but £8.1 billion above official forecasts.

A rise in debt interest payments has contributed to Britain’s worsening deficit, with inflation making some inflation-linked bonds more expensive to service. Healey has pledged to maintain strict fiscal discipline and follow fiscal rules requiring day-to-day spending to be balanced with tax receipts, but he has not said whether the budget will include tax rises.

Ruth Gregory, deputy chief UK economist at Capital Economics, said the figures painted “a dismal picture” of the public finances and supported her view that many policy ambitions would be reined in or delayed to avoid large tax rises or a market backlash.