This article is from the source 'guardian' and was first published or seen on . It last changed over 40 days ago and won't be checked again for changes.

You can find the current article at its original source at https://www.theguardian.com/business/live/2017/nov/21/uk-borrowing-deficit-public-finances-hammond-bank-of-england-business-live

The article has changed 14 times. There is an RSS feed of changes available.

Version 3 Version 4
UK budget deficit widened unexpectedly to £8bn in October - business live UK budget deficit widened unexpectedly to £8bn in October - business live
(35 minutes later)
Howard Archer, chief economic adviser at the EY Item Club, says the “weakened” October public finances have denied Philip Hammond a boost ahead of Wednesday’s budget.
#Hammond denied a boost going into Wednesday's #budget as #public #finances see y/y deterioration in Oct. PSNBex up to £8.0 bn from £7.5 bn in Oct 2016
But...he also expects borrowing for the full financial year to be below forecasts.
Despite widening to £8.0 bn in Oct from £7.5 bn a year earlier, #UK #budget deficit (PSNBex) still down 9.6% y/y over Apr-Oct at £38.5 bn. If continued pattern for whole of 2017/18 would come in at £41.4 bn vs £58.3 bn seen in March budget
Digging into the public finances, we can see that income tax receipts rose by 6.9% year-on-year in October, and VAT receipts rose by 2.3%.
But corporation tax dropped by almost 1% compared with October 2016, and revenue from fuel duty dropped by 2.1%.
You can see the dataset here.
The full public finances report is online here.
Bloomberg describe Britain’s October’s public finances as “disappointing”, ahead of Wednesday’s budget.
However, they still expect borrowing for 2017-18 as a whole to be lower than forecast.
Britain’s fiscal deficit unexpectedly widened as inflation saw debt costs rise to the highest for any October in 4 years https://t.co/QEFDXpkJGC pic.twitter.com/aCnl71SlLC
The ONS reports that UK government income, and spending, are both higher than a year ago.
In the current financial year-to-date, central government received £394.3bn in income, including £292.7bn in taxes. This was around 4% more than in the same period in the previous financial year.
Over the same period, central government spent £420.4bn; around 3% more than in the same period in the previous financial year. Of this amount, just below two-thirds was spent by central government departments (such as health, education and defence), around one-third on social benefits (such as pensions, unemployment payments, Child Benefit and Maternity Pay), with the remaining being spent on capital investment and interest on government’s outstanding debt.
Ross Campbell, public sector director at accountancy group ICAEW, says Philip Hammond doesn’t have much wriggle room for tomorrow’s budget.Ross Campbell, public sector director at accountancy group ICAEW, says Philip Hammond doesn’t have much wriggle room for tomorrow’s budget.
Looking at the annual trend, we are still running a large deficit which means our national debt continues to grow.Looking at the annual trend, we are still running a large deficit which means our national debt continues to grow.
UK public sector borrowing rose to £8bn in October (est. £7bn), up £500m since the same period last year, linked to recent higher inflation and increased debt costs.UK public sector borrowing rose to £8bn in October (est. £7bn), up £500m since the same period last year, linked to recent higher inflation and increased debt costs.
Economist Sam Tombs of Pantheon Economics reckons Britain will borrow less than forecast this financial year, despite the unexpected rise in October’s deficit.Economist Sam Tombs of Pantheon Economics reckons Britain will borrow less than forecast this financial year, despite the unexpected rise in October’s deficit.
Borrowing £0.5B higher in October than a year ago mainly due to a £1.2B jump in interest payments (blame high inflation). But borrowing is still on track to substantially undershoot March Budget forecasts: pic.twitter.com/kFh5oXEJ0JBorrowing £0.5B higher in October than a year ago mainly due to a £1.2B jump in interest payments (blame high inflation). But borrowing is still on track to substantially undershoot March Budget forecasts: pic.twitter.com/kFh5oXEJ0J
As this chart showed, the UK has been expected to borrow £58.3bn this financial year, up from £51.7 in 2016-17.As this chart showed, the UK has been expected to borrow £58.3bn this financial year, up from £51.7 in 2016-17.
However, the UK has only borrowed £38.5bn since April, some £4bn less than a year ago.However, the UK has only borrowed £38.5bn since April, some £4bn less than a year ago.
Britain’s deficit jumped last month because the cost of repaying existing government debt has risen to a record high for any October. Britain’s deficit jumped last month because the cost of repaying existing government debt jumped in October.
That’s because some government bonds are linked to inflation, to protect bond-holders from a surge in the cost of living.That’s because some government bonds are linked to inflation, to protect bond-holders from a surge in the cost of living.
The retail prices index has hit 4% in October -- as the slump in the pound since the Brexit vote has driven import costs higher.The retail prices index has hit 4% in October -- as the slump in the pound since the Brexit vote has driven import costs higher.
And this is now hitting the public finances, meaning the government has to borrow more (and thus repay more in the future....)And this is now hitting the public finances, meaning the government has to borrow more (and thus repay more in the future....)
As the ONS puts it:As the ONS puts it:
In October 2017, the debt interest paid by central government was £6.0 billion, while this represents the highest October interest payment on record it remains less than the highest recorded monthly payment of £7.2 billion in April 2017.In October 2017, the debt interest paid by central government was £6.0 billion, while this represents the highest October interest payment on record it remains less than the highest recorded monthly payment of £7.2 billion in April 2017.
This increase in debt interest payment is largely due to the movements in the level of the Retail Prices Index (RPI).This increase in debt interest payment is largely due to the movements in the level of the Retail Prices Index (RPI).
Channel 4’s Helia Ebrahimi has tweeted the details:Channel 4’s Helia Ebrahimi has tweeted the details:
Public sector net borrowing was higher than expected in October: £8bn vs £7.1bn consensus driven by higher interest payments of £1.2bnPublic sector net borrowing was higher than expected in October: £8bn vs £7.1bn consensus driven by higher interest payments of £1.2bn
The big picture from today’s public finances is that the UK national debt continues to grow.The big picture from today’s public finances is that the UK national debt continues to grow.
The Office for National Statistics says:The Office for National Statistics says:
Public sector net debt (excluding public sector banks) was £1,790.4 billion at the end of October 2017, equivalent to 87.2% of gross domestic product (GDP), an increase of £147.8 billion (or 4.5 percentage points as a ratio of GDP) on October 2016.Public sector net debt (excluding public sector banks) was £1,790.4 billion at the end of October 2017, equivalent to 87.2% of gross domestic product (GDP), an increase of £147.8 billion (or 4.5 percentage points as a ratio of GDP) on October 2016.
This is the first time since June that Britain’s monthly deficit has risen year-on-year.This is the first time since June that Britain’s monthly deficit has risen year-on-year.
This chart shows borrowing this financial year (dark blue) compared to 2016-17 (light blue).This chart shows borrowing this financial year (dark blue) compared to 2016-17 (light blue).
So, October’s £8bn deficit has eroded the improvement in the public finances since the spring.So, October’s £8bn deficit has eroded the improvement in the public finances since the spring.
The jump in Britain’s deficit to £8bn last month highlights the ‘headache’ facing chancellor Philip Hammond ahead of Wednesday’s budget, say Reuters.The jump in Britain’s deficit to £8bn last month highlights the ‘headache’ facing chancellor Philip Hammond ahead of Wednesday’s budget, say Reuters.
Here’s their first take:Here’s their first take:
Britain’s budget gap unexpectedly widened last month, underscoring finance minister Philip Hammond’s challenge as he juggles calls for more spending in his budget on Wednesday with the prospect of weaker economic growth ahead.Britain’s budget gap unexpectedly widened last month, underscoring finance minister Philip Hammond’s challenge as he juggles calls for more spending in his budget on Wednesday with the prospect of weaker economic growth ahead.
The deficit, excluding state-run banks, stood at £8.0bn, up 6.9% compared with October 2016, the Office for National Statistics said on Tuesday.The deficit, excluding state-run banks, stood at £8.0bn, up 6.9% compared with October 2016, the Office for National Statistics said on Tuesday.
Rising debt costs, linked to Britain’s higher inflation since the Brexit vote, were a driver of the shortfall.Rising debt costs, linked to Britain’s higher inflation since the Brexit vote, were a driver of the shortfall.
The budget shortfall was bigger than a median forecast of £7.0bn in a Reuters poll of economists.The budget shortfall was bigger than a median forecast of £7.0bn in a Reuters poll of economists.
Breaking! Britain’s deficit was bigger than expected last month.Breaking! Britain’s deficit was bigger than expected last month.
The UK borrowed just over £8bn to balance the books in October, up from £7.56bn in October 2016 (that excludes the impact of Britain’s state-owned banks)The UK borrowed just over £8bn to balance the books in October, up from £7.56bn in October 2016 (that excludes the impact of Britain’s state-owned banks)
That’s more than the £7bn which City economists had expected.That’s more than the £7bn which City economists had expected.
Ooops! UK Public sector net borrowing (excluding public sector banks) increased by £0.5 billion to £8.0 billion in October 2017, compared with October 2016.Ooops! UK Public sector net borrowing (excluding public sector banks) increased by £0.5 billion to £8.0 billion in October 2017, compared with October 2016.
But despite this rise in borrowing, Britain’s has borrowed less this financial year than a year ago.But despite this rise in borrowing, Britain’s has borrowed less this financial year than a year ago.
Public sector net borrowing since the start of this year has now reached £38.5bn, down 9.6% year-on-year.Public sector net borrowing since the start of this year has now reached £38.5bn, down 9.6% year-on-year.
More to follow!More to follow!
Stand by your desks! UK Public Finance data is up in 5 minutes... #GBPStand by your desks! UK Public Finance data is up in 5 minutes... #GBP
In the City, shares in budget airline easyJet have soared to the top of the FTSE 100 leaderboard, after it reported a surge in bookings.In the City, shares in budget airline easyJet have soared to the top of the FTSE 100 leaderboard, after it reported a surge in bookings.
EasyJet may be profiting from the collapse of rival Monarch, and Ryanair’s recent pilot shortage.EasyJet may be profiting from the collapse of rival Monarch, and Ryanair’s recent pilot shortage.
But...catering giant Compass has slumped by up to 5% despite posting an 18% rise in operating profits. The City may be disappointed by an drop in revenue at its offshore business, which cleans and caters at remote oil and gas extraction and mining sites.But...catering giant Compass has slumped by up to 5% despite posting an 18% rise in operating profits. The City may be disappointed by an drop in revenue at its offshore business, which cleans and caters at remote oil and gas extraction and mining sites.
EU Movers: easyJet +2.7%Babcock +2.3%ITV +1.9%SSE +1.8%Enel +1.2%Compass Group -5%Johnson Matthey -1.9%Kingfisher -1.5%EU Movers: easyJet +2.7%Babcock +2.3%ITV +1.9%SSE +1.8%Enel +1.2%Compass Group -5%Johnson Matthey -1.9%Kingfisher -1.5%
Global investors seem to have shaken off the German election crisis.Global investors seem to have shaken off the German election crisis.
Asian stocks hit a 10-year high overnight, with traders citing optimism over the strength of the global economy.Asian stocks hit a 10-year high overnight, with traders citing optimism over the strength of the global economy.
European markets have opened calmly this morning too, with the UK, French and German indices broadly flat. The word in the City this morning is that Germany’s economy is strong enough to shrug off the uncertainty of a second election (if it comes to that).European markets have opened calmly this morning too, with the UK, French and German indices broadly flat. The word in the City this morning is that Germany’s economy is strong enough to shrug off the uncertainty of a second election (if it comes to that).
But are things too quiet? Nick Leeson, the man who brought Barings Bank down in the 1990s, suspects there may be trouble ahead....But are things too quiet? Nick Leeson, the man who brought Barings Bank down in the 1990s, suspects there may be trouble ahead....
Where have all the Rogue Traders gone? Markets at highs, lots of self congratulation, complacency rife. More than likely one out there somewhere!Where have all the Rogue Traders gone? Markets at highs, lots of self congratulation, complacency rife. More than likely one out there somewhere!
Even if October’s public finances do beat expectations this morning, Britain’s long-term borrowing needs are still worryingly high.Even if October’s public finances do beat expectations this morning, Britain’s long-term borrowing needs are still worryingly high.
Economists at JP Morgan say Philip Hammond will be batting on a ‘sticky wicket’ tomorrow, as the independent Office for Budget Responsibility (Britain’s fiscal watchdog) may revise down its growth forecasts. That will have a nasty impact on how much tax revenue the government might take in over the coming years.Economists at JP Morgan say Philip Hammond will be batting on a ‘sticky wicket’ tomorrow, as the independent Office for Budget Responsibility (Britain’s fiscal watchdog) may revise down its growth forecasts. That will have a nasty impact on how much tax revenue the government might take in over the coming years.
They write:They write:
Next week’s budget will be significant for both economic and political reasons. The OBR is set to downgrade its view of potential growth significantly, forcing the Chancellor to pencil in either more borrowing or more austerity—a particular challenge given the domestic political backdrop.Next week’s budget will be significant for both economic and political reasons. The OBR is set to downgrade its view of potential growth significantly, forcing the Chancellor to pencil in either more borrowing or more austerity—a particular challenge given the domestic political backdrop.
The government lacks an overall majority and is under pressure to increase its financial offer ahead of the mid-December EU summit. The Chancellor is also under pressure to use fiscal policy to offer support to key parts of the electorate amid an ongoing real income squeeze, addressing these concerns while ensuring his budget has enough support in Parliament to pass.The government lacks an overall majority and is under pressure to increase its financial offer ahead of the mid-December EU summit. The Chancellor is also under pressure to use fiscal policy to offer support to key parts of the electorate amid an ongoing real income squeeze, addressing these concerns while ensuring his budget has enough support in Parliament to pass.
JP Morgan thus expect Hammond to absorb any growth downgrades by planning to borrow more over the next few years.JP Morgan thus expect Hammond to absorb any growth downgrades by planning to borrow more over the next few years.
This chart shows how the UK monthly deficit has fluctuated over the last two years:This chart shows how the UK monthly deficit has fluctuated over the last two years:
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
Britain’s public finances will be in the spotlight today as we learn how much the UK borrowed to balance the books last month.Britain’s public finances will be in the spotlight today as we learn how much the UK borrowed to balance the books last month.
Economists predict that the monthly deficit will hit £7bn, down from around £7.6bn in October 2016.Economists predict that the monthly deficit will hit £7bn, down from around £7.6bn in October 2016.
A month ago, September’s deficit came in at just £5.9bn, the lowest in a decade, thanks to a bumper crop of tax takings.A month ago, September’s deficit came in at just £5.9bn, the lowest in a decade, thanks to a bumper crop of tax takings.
Any drop in the October deficit would be welcome news for chancellor Philip Hammond as he puts the finishing touches to tomorrow’s budget.Any drop in the October deficit would be welcome news for chancellor Philip Hammond as he puts the finishing touches to tomorrow’s budget.
Hammond faces a tricky task, given Britain’s productivity problems, and the looming impact of Britain’s exit from the EU. But so far this financial year, the UK has actually borrowed around £6bn less than expected.Hammond faces a tricky task, given Britain’s productivity problems, and the looming impact of Britain’s exit from the EU. But so far this financial year, the UK has actually borrowed around £6bn less than expected.
Finn McLaughlin of Capital Economics expects another decent month’s borrowing figures:Finn McLaughlin of Capital Economics expects another decent month’s borrowing figures:
We expect the public sector net borrowing requirement measure of borrowing to continue to undershoot the OBR’s forecast, providing some good news ahead of the Chancellor’s Autumn Budget on Wednesday. Indeed, we have pencilled in borrowing of £7.0bn in October, just below last year’s outturn of £7.5bn, leaving cumulative borrowing 7% lower than last year.We expect the public sector net borrowing requirement measure of borrowing to continue to undershoot the OBR’s forecast, providing some good news ahead of the Chancellor’s Autumn Budget on Wednesday. Indeed, we have pencilled in borrowing of £7.0bn in October, just below last year’s outturn of £7.5bn, leaving cumulative borrowing 7% lower than last year.
However, this will probably be overshadowed by downward revisions to the OBR’s forecasts for economic growth and therefore the medium-term outlook for the public finances.However, this will probably be overshadowed by downward revisions to the OBR’s forecasts for economic growth and therefore the medium-term outlook for the public finances.
Kallum Pickering of Berenberg bank thinks Hammond should use any windfall this wisely...Kallum Pickering of Berenberg bank thinks Hammond should use any windfall this wisely...
Although Brexit uncertainty hangs over the UK’s long-term outlook, the economy continues to hold up well. Healthy tax receipts so far this year will likely lower projected borrowing modestly in the near term. The Chancellor ought to use this boost to finances to make a stronger commitment to budgetary discipline.Although Brexit uncertainty hangs over the UK’s long-term outlook, the economy continues to hold up well. Healthy tax receipts so far this year will likely lower projected borrowing modestly in the near term. The Chancellor ought to use this boost to finances to make a stronger commitment to budgetary discipline.
Unfortunately, the political barriers between Hammond and this sensible route forward are probably too large.Unfortunately, the political barriers between Hammond and this sensible route forward are probably too large.
Also coming up today....Also coming up today....
MPs on the Treasury committee will grill four Bank of England policymakers over the latest inflation report, and their decision to raise interest rates. Deputy governor Sir Jon Cunliffe (who opposed the rate hike) will be accompanied by three external members - Ian McCafferty, Gertjan Vlieghe and Michael Saunders.MPs on the Treasury committee will grill four Bank of England policymakers over the latest inflation report, and their decision to raise interest rates. Deputy governor Sir Jon Cunliffe (who opposed the rate hike) will be accompanied by three external members - Ian McCafferty, Gertjan Vlieghe and Michael Saunders.
European investors will be watching German politics closely, after coalition talks floundered on Sunday night. Angela Merkel has hinted that she’d rather go through another general election than lead a minority government.European investors will be watching German politics closely, after coalition talks floundered on Sunday night. Angela Merkel has hinted that she’d rather go through another general election than lead a minority government.
After yesterday’s wobbles, the markets look calm this morning as traders await developments from Berlin.After yesterday’s wobbles, the markets look calm this morning as traders await developments from Berlin.
European market opening call @LCGTrading $FTSE +5 points at 7394$DAX +8 points at 13066$CAC +5 points at 5345$IBEX -2 points at 10023European market opening call @LCGTrading $FTSE +5 points at 7394$DAX +8 points at 13066$CAC +5 points at 5345$IBEX -2 points at 10023
In the City, DIY chain Kingfisher, engineering firm Babcock, food producer Compass and budget airline easyJet are reporting results.In the City, DIY chain Kingfisher, engineering firm Babcock, food producer Compass and budget airline easyJet are reporting results.
The agendaThe agenda
9.30am GMT: UK public finances for October9.30am GMT: UK public finances for October
10am GMT: Bank of England policymakers Sir Jon Cunliffe, Ian McCafferty, Gertjan Vlieghe and Michael Saunders appear before the Treasury Committee to discuss the Bank’s inflation report10am GMT: Bank of England policymakers Sir Jon Cunliffe, Ian McCafferty, Gertjan Vlieghe and Michael Saunders appear before the Treasury Committee to discuss the Bank’s inflation report
11am GMT: CBI industrial trends report for October.11am GMT: CBI industrial trends report for October.