UK Vows to Drive Down Debt as Interest Bill Pushes Government Borrowing to £20 Billion

Video grab image of Chancellor Jeremy Hunt making an emergency statement to the nation from the Treasury in London, on Oct. 17, 2022. (Marc Ward/PA Media)

The UK government has vowed to do “whatever is necessary” to drive down debt after its rising debt interest payment pushed public sector borrowing to £20 billion ($22 billion) last month.

According to the latest data from the Office for National Statistics (ONS), the UK’s public sector net borrowing was £20 billion in September 2022, which was £2.2 billion more than in the same month of last year.

This is the second-highest September borrowing figure since monthly records began in 1993, the ONS said. The only instance borrowing was higher was in September 2020 at the height of the COVID-19 pandemic.

Commenting on the latest figures, Chancellor of the Exchequer Jeremy Hunt said: “Strong public finances are the foundation of a strong economy. To stabilise markets, I’ve been clear that protecting our public finances means difficult decisions lie ahead.

“We will do whatever is necessary to drive down debt in the medium term and to ensure that taxpayers’ money is well spent, putting the public finances on a sustainable path as we grow the economy.”

Soaring Debt Interest

The borrowing figure for September outpaced the predictions of economists, who had forecast £17 billion for the month, and was significantly above the £14.8 billion estimated by the Office for Budget Responsibility (OBR) back in March.

The increased borrowing was partly driven by £7.7 billion of government debt interest payments for the month, reflecting an increase of £2.5 billion compared with the same month in 2021.

The ONS said that the volatility in interest payments is largely because of the effect of Retail Prices Index (RPI) changes on index-linked gilts. In September, RPI inflation increased to 12.6 percent.

Fiscal Plan

Jake Finney, an economist at PwC, said the government will need to consider further tax increases or cuts to public spending.

“Public sector debt as a share of GDP is now at 98 percent, its highest level since the early 1960s. To meet its current fiscal targets the government will need to announce around £30–40 billion of spending cuts or tax rises,” he said.

Following the release of the September borrowing figures, the opposition Labour Party renewed its call for an immediate general election.

Shadow Chancellor Rachel Reeves said the Conservatives “have caused huge amounts of damage.”

“The volatility in the financial markets that has added to government borrowing costs but also the borrowing costs for homeowners,” she said.

A new Conservative prime minister or another new chancellor “is not going to provide the country with the leadership and stability that we desperately need,” she added.

PA Media contributed to this report.