New official data reveals that UK government borrowing for November was lower than the previous year but came in higher than economists had predicted, with a costly policy reversal on winter fuel support contributing to the overshoot.
November Borrowing: A Mixed Picture for the Treasury
The Office for National Statistics (ONS) reported that public sector borrowing stood at £11.7 billion last month. This represents a significant decrease of £1.9 billion compared to November of the previous year, marking the lowest borrowing figure for that month since 2021.
The primary driver behind this annual drop was a sharp reduction in debt interest payments, which fell by £200 million year-on-year to £3.4 billion, their lowest November level in six years. Increased receipts from taxes and National Insurance contributions also provided a boost to the Treasury's coffers.
However, the outcome was less positive than anticipated. The £11.7 billion figure was notably higher than the £10.3 billion forecast by most economists and substantially above the £8.6 billion predicted in March by the government's independent fiscal watchdog, the Office for Budget Responsibility (OBR).
The Impact of the Winter Fuel Payment Reversal
A key factor behind the borrowing overshoot was the government's U-turn on its planned restriction of winter fuel payments. Initially intending to impose strict means testing, the government later opted to make the payment to almost all pensioners, excluding only those with individual earnings above £35,000 per year.
This policy reversal resulted in an extra £1.8 billion of spending, which helped push the cumulative borrowing for the financial year to date higher. For the first eight months of the fiscal year, borrowing reached £132.3 billion.
This total is £10 billion higher than the same period last year and a substantial £16.8 billion above the OBR's forecast from March. The winter fuel decision alone prompted an upward revision of £3.9 billion to the borrowing total for the seven months leading to October.
Mounting Debt and Economist Concerns
The broader picture of public debt remains daunting. Public sector net debt, which includes the Bank of England, reached £2.93 trillion by the end of November. This equates to approximately 95.6% of the UK's gross domestic product (GDP), a level not consistently seen since the early 1960s.
Economists expressed significant concern over the latest figures. Elliott Jordan-Doak, senior UK economist at Pantheon Macroeconomics, stated there was "very little Christmas cheer for the Chancellor," criticising the government's reliance on "distortionary tax increases with uncertain yields" and expressing doubt about its ability to implement announced spending cuts.
Martin Beck of WPI Strategy highlighted that "confidence remains the missing ingredient," arguing that a credible pro-growth strategy from the government is as crucial for public finances as detailed tax and spending plans.
In response, Chief Secretary to the Treasury James Murray emphasised the burden of debt interest, which consumes £1 in every £10 of public spending. He defended the recent Budget, stating it was designed to deliver on the government's pledge to reduce debt and borrowing.
