In December 2024, the UK government reported a larger-than-expected budget deficit of 17.8 billion pounds, significantly higher than the forecasted 14.1 billion pounds. This increase in borrowing was driven by rising debt interest payments, which reached 8.3 billion pounds, the third-highest December total on record. Additionally, a one-off 1.7 billion-pound expenditure for repurchasing military homes added to the fiscal strain. Public sector net borrowing was more than 10 billion pounds higher than the previous year, underscoring the ongoing financial pressures.
Finance Minister Rachel Reeves, who has faced growing challenges since the government’s October budget raised borrowing and taxes, reassured the public that Britain’s finances were under control. Speaking at the World Economic Forum in Davos, she emphasized that the government would continue making decisions to meet its fiscal targets. These targets include balancing day-to-day spending with revenues by the end of the decade and reducing public sector liabilities as a percentage of GDP.
Despite these fiscal challenges, there are signs of improvement in the market, as recent reductions in borrowing costs have positively impacted British government bonds. However, experts, including senior economist Cara Pacitti from the Resolution Foundation, warned that the slowdown in the economy might not yet be reflected in tax receipts, adding further uncertainty to the UK’s financial outlook. The government has borrowed 129.9 billion pounds in the first nine months of the 2024/25 financial year, exceeding forecasts by 4 billion pounds.
Source: REUTERS