UK deficit surpasses expectations, pressuring Reeves

The UK government recorded a larger-than-expected deficit of £79.6 billion ($103.6 billion) for the first half of the fiscal year, intensifying pressure on Chancellor of the Exchequer Rachel Reeves to implement tax increases and borrow more for upcoming budget measures.

This figure represents a £6.7 billion overshoot compared to official forecasts, with September’s deficit at £16.6 billion, slightly below expectations but the third-highest for the month on record.

Despite the deficit, total government debt was revised to 98.5 per cent of GDP in September, avoiding the symbolic 100 per cent milestone.

These figures, released by the Office for National Statistics, come too late to be included in the Office for Budget Responsibility’s forecasts ahead of the October 30 budget announcement.

Reeves is under pressure to balance higher public spending, including public sector pay increases and election pledges, with the need for fiscal tightening.

Speculation grows around potential tax hikes to stabilise public finances and enhance funding for struggling services. Analysts caution that the Chancellor’s scope for increasing spending without raising taxes is limited, although adjustments to fiscal rules could allow for more public investment.

Attribution: Bloomberg

Subediting: M. S. Salama