- Government borrows 11.2 billion pounds in November
- Economists had expected reading of around 13 billion pounds
- Deficit pushed down by one-off drop in interest payments
- Economic outlook remains tough for Reeves
Dec 20 (Reuters) - Britain ran a smaller-than-expected budget deficit last month as a past lull in inflation pushed down interest paid on government bonds, giving a small boost to finance minister Rachel Reeves who has been under pressure following her budget announcement.
Public sector net borrowing in November was 11.249 billion pounds ($14.06 billion), the Office for National Statistics said on Friday. Economists polled by Reuters had a median forecast of 13 billion pounds for headline public sector net borrowing.
The data showed the challenge Reeves faces to meet her new fiscal rules with the economy losing momentum - the Bank of England on Thursday forecast zero growth in the last three months of 2024 - and inflation rising again.
"What will worry government is that recent economic indicators such as weak GDP growth and rising inflation are flashing amber," said Alison Ring, director of public sector and taxation at the ICAEW professional body for accountants.
"Money remains extremely tight and that is unlikely to change any time soon."
Government borrowing has been higher than expected by economists polled by Reuters in eight of 11 months so far in 2024, while the ONS revised up its estimate for the deficit in the rest of 2024/25 by 5 billion pounds.
The lower-than-expected deficit in November reflected a 1.8-billion-pound reduction in the compensation applied to the government's inflation-linked debt as the retail price index fell 0.3% during September.
That drop in prices fully unwound in October and November.
Reeves on Oct. 30 announced the biggest tax increases in three decades - most of them from higher social security contributions paid by employers - as she promised to balance day-to-day spending with tax revenues by the end of the decade.
But she also plans to increase borrowing sharply in the coming years as the new Labour government seeks to improve public services and invest more in infrastructure than had been planned by the previous Conservative administration.
The government borrowed 113.2 billion pounds over the first eight months of the 2024/25 financial year, roughly unchanged compared with the same point in 2023/24 - but 2 billion pounds more than forecast by the Office for Budget Responsibility in October.
Reeves has described her budget as set of one-off measures to stabilise the public finances.
($1 = 0.8001 pounds)
Reporting by Andy Bruce; editing by William James and Andrew Heavens
Source: Reuters