Public sector pay deals help drive up UK borrowing

Alex Kerr, UK economist at Capital Economics, said October’s “disappointing” borrowing figures demonstrated “the fiscal challenge that the chancellor still faces”, with Reeves having “little wiggle room”.

“While the chancellor has downplayed the chances of further tax-raising measures, if she wants to increase day-to-day spending in future years, she may need to raise taxes to pay for it,” he said, referring to the chancellor’s self-imposed targets.

Last month’s Budget is set to increase government spending by almost £70bn a year over the next five years, according to the Office for Budget Responsibility,, external with half funded through higher taxes and the rest coming through higher borrowing.

The ONS said that net debt – the total amount of money owed by the government that has built up over years – had reached £2.8 trillion.

This amount is 97.5% of the size of the UK’s economy as measured by gross domestic product (GDP), and remains at levels last seen in the early 1960s.

At the Budget, Reeves changed the government’s public finance rules, which will see it track a wider measure of debt to give it more scope to borrow for investment.

This new measure of debt – public sector net financial liabilities (PSNFL) – was at 83.7% of GDP in October, the ONS said.

The government is aiming to have this measure of debt falling as a share of the economy by the 2029-30 financial year.