UK Budget Logs Second Biggest September Deficit

The UK budget deficit reached its second highest September level since the monthly records began in 1993, the Office for National Statistics said Friday.

Excluding public sector banks, public sector net borrowing was GBP 20.0 billion in September, which was GBP 2.2 billion more than in September 2021. The expected deficit was GBP 17.1 billion.

The current borrowing was GBP 5.2 billion more than the GBP 14.8 billion that the Office for Budget Responsibility had forecast.

Public finances have been under pressure even before the ‘mini-budget’ announcement on September 23 by the then chancellor Kwasi Kwarteng.

Huge tax cuts by Prime Minister Liz Truss, who quit the post on Thursday, created chaos in the bond and currency markets.

The government came under severe criticism from within the Conservative Party as well as from outside quarters, for these measures at a time of soaring inflation and rising cost of living.

The pound hit a record low in the days following the mini-budget and the UK debt yields surged, forcing the Bank of England to intervene and buy gilts.

Kwarteng was removed from the post of chancellor on October 14. His successor Jeremy Hunt reversed almost all of the tax measures unveiled in the mini-budget.
However, the continuing turmoil in the markets finally led to the resignation of Truss on October 20.

Hunt is set to publish the government’s fiscal rules alongside an OBR forecast, and further measures, on October 31.

In the financial year to September, PSNB narrowed by GBP 24.9 billion to GBP 72.5 billion, ONS figures showed.

At the end of September, the public sector net debt excluding public sector banks was GBP 2,450.2 billion, or around 98.0 percent of gross domestic product. Debt has reached levels last seen in the early 1960s.

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