Public sector pay rises helped fuel a surge in Treasury borrowing as Rachel Reeves scrambles to fill a £40bn black hole in the public finances.
The Government has borrowed £6.7bn more so far in this financial year than was forecast by the Office for Budget Responsibility (OBR), delivering the Chancellor less room for her sweeping spending and investment plans.
Public sector net borrowing excluding banks stood at £79.6bn in the six months to September, which was £1.2bn more the same point last year, according to the Office for National Statistics (ONS).
ONS deputy director for public sector finances Jessica Barnaby said: “While tax revenue increased, this was outweighed by increased spending, partly due to higher debt interest and public sector pay rises.”
Sir Keir Starmer’s government announced a series of inflation-busting public sector pay rises within eight weeks of taking office in July, with boosts of 5.5pc handed to teachers and nurses, 6pc to Armed Forces personnel, 5pc to prison service workers and 4.7pc to the police. Senior NHS managers were given a 5pc pay rise.
Chief Secretary to the Treasury Darren Jones said: “We have inherited a £22bn black hole in the country’s public finances, including no plan to fund pay deals for millions of public sector workers.
“Strikes cost at least £3bn last year, so it was the right thing to do to end those damaging disputes.”
For the month of September, total public sector net borrowing excluding public sector banks was £16.6bn, which was lower than economists’ expectations of £17.5bn.
However, September borrowing was £1.2bn more than a year ago and it was the third biggest September deficit since records began in 1993.
Meanwhile, the public borrowing figure for August was revised down from £13.7bn to £13bn.
Public sector net debt excluding public sector banks reached around 98.5pc of the UK’s annual gross domestic product (GDP).
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