Reeves suffers as UK borrowing suddenly increases

Not a valid attachment ID.
Government borrowing rose more than expected in December to its highest  monthly level  in four years,  adding to the pressure on the  UK's finances.
The deficit – the difference between spending and tax revenue  – reached £17.8bn last month, £10.1bn more than in December 2023, official figures  show.
Spending on public services,  welfare benefits and debt interest  rose during the year, while  a rise in tax  revenue was offset by  cuts to National Insurance made by the previous  government.
The recent rise in borrowing costs  threatens the  government's economic plans, with Chancellor Rachel Reeves facing pressure after figures last week showed the UK economy had  stagnated.
The government has said economic growth is its top priority to  improve living standards, but fears  about the health of the UK economy  are fuelling speculation that Reeves could cut spending on public  services. The total  amount borrowed by the government last  month, £17.8 billion, is much higher than the  £14.6 billion forecast by the Office for Budget Responsibility, the  UK's official  forecast.
Interest on government debt  reached £8.3 billion, the  third highest level of interest payments on the debt in December since monthly records began in  1997.
Earlier this  month, interest rates charged on government debt  jumped partly on concerns  about the  UK's economic outlook, before falling  again.
On Wednesday, the interest rate charged on  10-year UK government debt  fell to 4.5%,  close to where it was at the start of the  year.
During his visit to the World Economic Forum in Davos, Switzerland, Reeves  downplayed the impact  that the recent market  turmoil would have on  compliance with its self-imposed  lending rules, which  are designed to maintain  its credibility with financial markets and  taxpayers. The Chancellor has  been on a trip to  attract investment in the UK  from the  world's leading business and  financial leaders.
But Alex Kerr,  a British economist at Capital Economics, said  that against  a backdrop of sluggish economic growth and high interest rates,  "the borrowing overshoot in  December is disappointing news for the  Chancellor."
He added that while borrowing costs  in the UK have fallen, they  remain higher than at the time of the  budget.
Kerr said  the weak economic growth suggested Reeves  "may need to raise  rates and/or cut  spending" in March to meet  his rules.
Elliott Jordan-Doak, senior economist at Pantheon Macroeconomics,  also said the chancellor  will outline spending  cuts in March, adding that  "tax increases  in the  upcoming October  budget are also a  gamble." Reeves has  already said that she  will not  return "with more  loans or more taxes"  after her first  budget in  October.
Businesses are set to bear the brunt of  the tax  hike that comes into effect in April,  along with  rising National Insurance  rates and a  cut in the threshold for  employers.
Businesses have repeatedly warned  that the extra costs, along with minimum  wage rises and business  tax cuts, could  hit UK economic growth, with employers expecting to  earn less  money to  provide wage increases and  to create new  jobs.
On Wednesday, the chancellor  suggested she would  support the expansion of Heathrow  airport to boost the economy, despite environmental  concerns.
The Treasury is looking to support a third runway at  Heathrow by approving a second runway at Gatwick, but such projects  will not start for some  time. In addition, Reeves said regulators  need to "regulate for growth"  after the  head of the UK's competition watchdog  was ousted by government ministers on  Tuesday.
Reeves said Marcus Bokkerink, who has  led the Competition and Markets Authority since 2022,  "realised it was time for a  reset".
Government sources said Mr Bokkerink's departure followed a  disappointing presentation by the CMA on ideas on how to stimulate economic  growth.
ALT TEXT:
Bar chart showing  UK public sector net borrowing, excluding public sector banks, from December 2020 to December 2024. In December 2020, public sector net borrowing  was £24.2  billion , post-Covid. The amount borrowed then  fell to £10.0 billion in December 2021, before rising again to £15.1 billion in December 2022. It fell again to £7.7 billion in December 2023, before rising  again to £10.0 billion in December 2024. ... rising to £17.8 billion in December 2024, the highest  monthly figure for  four years. Darren Jones, the Chief Secretary to the Treasury, said the government's borrowing rules were "non-negotiable" to maintain economic stability and  growth.
He added  that the government would  "eliminate waste to ensure every penny of  taxpayers' money is spent  productively".
The amount borrowed was the  third highest for a December since monthly records began in 1993. It  involves a one-off  payment of £1.7bn from the government to the private sector to  buy military  housing.
The increase in borrowing  means that, with most of the financial year  now over, the difference between what the government has spent and what it earns in  tax is £4bn  higher than official  forecasts.
However, this figure includes  many estimates which are often revised  later.
The January borrowing figure  could also be  significantly different  from December's due to  the large number of people  filing self-assessed tax returns,  increasing government revenue.

[attachment deleted by admin]