The UK budget deficit for December was larger than expected as government borrowing increased compared to the previous month.
Public sector net borrowing excluding banks was £17.8 billion compared to a deficit in November of £11.8 billion, the Office for National Statistics revealed, which was higher than the consensus forecast of £14.1 billion.
It was the highest borrowing in December in four years but economists noted that some of the overshoot was due to a one-off £1.7 billion payment from the government to repurchase military accommodation, which has also been recorded as investment and so will be excluded from the Chancellor’s current budget deficit measure.
The budget deficit, which represents borrowing to fund day-to-day public sector activities, was £10.0 billion in December, up from £2.7 billion a year earlier but lower than 2022 post the Liz Truss mini-budget.
The UK December public sector net cash requirement was £19.9 billion compared to £13.13 billion in November.
Interest payable on central government debt was £8.3 billion in December, which the ONS said was largely because of inflation, up from £4.5 billion a year earlier and the third-highest December figure since monthly records began in 1997.
Alex Kerr, UK economist at Capital Economics, said: "Against a backdrop of slowing GDP growth and high interest rates, December’s overshoot in borrowing is further disappointing news for the Chancellor.
"That said, most of the overshoot was because of a one-off payment and components that are heavily revised so the figures may not be as bad as they first appear."
But Kerr says the figures leave the current budget deficit on track to overshoot the Office for Budget Responsibility’s forecast of £55.5 billion in the 2024/25 fiscal year by around £1.5 billion.
This data "underlines the challenges that face the Chancellor. And although market interest rate expectations and gilt yields have fallen in the last week, they are still higher than at the time of the Budget and suggest that the Chancellor’s headroom against her fiscal rules has been whittled down from £9.9 billion in October to £2.0 billion.
"That combined with a weakening economy suggest that, in order to meet her fiscal rules, the Chancellor may need to raise taxes and/or cut spending in the next fiscal statement on 26th March."