U.K. records biggest October budget deficit since 2009 on spending

Britain has recorded the largest budget deficit for any October since 2009, dealing a blow to Chancellor of the Exchequer George Osborne less than a week before he unveils a key fiscal statement.

Net borrowing excluding public-sector banks was 8.2 billion pounds ($12.5 billion) compared with 7.1 billion pounds a year earlier, the Office for National Statistics said in London on Friday. Economists in a Bloomberg News survey forecast 6 billion pounds. Government receipts fell 1.8 percent and spending increased 3.1 percent.

The figures set the stage for the spending plans that Osborne will announce on Nov. 25. Commitment to increase spending on security in the wake of the Paris attacks and plow billions into infrastructure will come against a backdrop of further cuts to government department as Osborne seeks to deliver on a commitment to return Britain to surplus by 2020.

In the first seven months of the fiscal year, the deficit came in at 54.3 billion pounds, down 11 percent from a year earlier. That leaves Osborne on course to overshoot his target of cutting the shortfall to 69.5 billion pounds, or 3.7 percent of GDP, in the full fiscal year that ends in March. The Office for Budget Responsibility will publish new forecasts on Wednesday.

The increase in spending in October was led by government departments, whose outlays rose 4.2 percent on the year. Revenue was depressed as the Treasury received less in gilt-coupon payments from the Bank of England’s Asset Purchase Facility. Excluding this source of income, government revenue rose 1.4 percent.

The measure used to calculate how much the Treasury needs to borrow in the financial markets showed a surplus of 65 million pounds, leaving the total deficit so far this fiscal year at 52.3 billion pounds. Net debt was 1.53 trillion pounds, or 80.5 percent of GDP.

Source: Bloomberg