Borrowing hits a four-year high for December
22 January 2025, 06:19 | Updated: 22 January 2025, 10:43
The Treasury borrowed more than expected last month to record the highest December sum for four years, official figures have shown, with higher debt interest payments adding to the bill.
The Office for National Statistics (ONS) reported a net borrowing figure for December of £17.8bn when a sum just above £14bn had been expected by economists.
It left public sector net borrowing £10.1bn up on the same month last year and £8.9bn higher than at the same point in the last financial year but still within the range expected by the Office for Budget Responsibility.
Borrowing is on the up amid a budget-led drive for public sector investment, but the ONS data showed an £8.3bn debt interest bill - the third-highest December total on record.
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The report said that higher bill was mainly explained by shifts in the rate of inflation linked to the borrowing.
A £1.7bn payment for the repurchase of military dwellings added to the total December figure.
The data was revealed as Chancellor Rachel Reeves attends the World Economic Forum in Davos for a series of meetings with global business leaders in a bid to showcase the UK.
She described the public finances as "in order".
There is a chill, however, around the UK's immediate economic prospects with investors recently piling pressure on her stewardship of the purse-strings by demanding higher risk premiums to hold UK government debt in the form of bonds, known as gilts.
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UK long-term borrowing costs highest this century
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Wage growth and jobless rate rising
Long-term borrowing costs hit highs not seen since 1998 amid a global sell-off ahead of President Trump taking office earlier this month, with the 30-year UK gilt yield still above 5%.
It ticked up by eight basis points in the wake of the ONS report being released but soon fell back in line with other major economies.
Nevertheless, the first six months in charge of the public finances have proved a baptism of fire for the chancellor, who promised during the election campaign to make economic growth her top priority.
But she and the prime minister have been subsequently accused of shattering confidence through warnings of a "tough" budget ahead due to an alleged black hole in the public finances inherited from the Tories.
It was measured at £22bn and her fiscal statement on 30 October put business mainly on the hook for £40bn of tax increases announced.
The economy is estimated to have largely flatlined during the second half of last year, with major employers warning that investment, jobs and pay growth ahead are under threat to help offset the impact of the additional costs due from April when tax hikes, including from employer national insurance contributions, take effect.
They have also stated that higher prices for consumers will also form part of the mix.
Employment figures released on Tuesday suggested that firms were already taking action.
Data from HM Revenue & Customs showed the number of payrolled employees was estimated to have fallen by 47,000 during the 12 months to December - the biggest drop since November 2020.
Economists see economic growth being supported this year by public sector investment announced in the budget.
The big question mark is over the contribution from the private sector.
Jessica Barnaby, deputy director for public sector finances at the ONS, said: "At almost £18bn, borrowing last month was the third highest in any December on record.
"Compared with December 2023, spending on public services, benefits, debt interest and capital transfers were all up, while an increase in tax receipts was partially offset by a reduction in national insurance contributions, following the rate cuts earlier in 2024."
Chief Secretary to the Treasury Darren Jones said of the data: "Economic stability is vital for our number one mission of delivering growth, that's why our fiscal rules are non-negotiable and why we will have an iron grip on the public finances.
"Through our spending review we will interrogate every line of government spending for the first time in 17 years. We'll root out waste to ensure every penny of taxpayer's money is spent productively and helps deliver our Plan for Change."
(c) Sky News 2025: Borrowing hits a four-year high for December
