Record growth in public sector pay and rising welfare costs have pushed government borrowing to its highest annual level outside the pandemic, according to official figures.
The Office for National Statistics said the budget deficit stood at £11bn in November, the first borrowing data since Rachel Reeves’s £30bn tax-raising Budget. Although this was £2bn lower than a year earlier, it takes total borrowing so far this financial year to £132.3bn.
That is the largest deficit on record outside the Covid period, underlining the scale of the challenge facing the Chancellor as public spending continues to rise. The ONS said higher inflation, rapid public sector pay growth and increasing welfare payments were the main drivers of higher costs, with benefits spending expected to keep rising faster than inflation.
Figures published earlier this week showed public sector wages increased by 7.6% over the past year — the fastest pace since records began in 2001 — almost double the 3.9% growth seen in the private sector. This comes as doctors prepare for industrial action over pay.
The ONS also reported a setback for consumer spending, with retail sales unexpectedly falling by 0.1% in November, suggesting Black Friday failed to provide a boost ahead of Christmas.
Spending on benefits has risen by £15.1bn to £219.3bn so far this financial year, while interest payments on government debt total £71.1bn. The Office for Budget Responsibility has already raised its borrowing forecast for the year by £20bn to £138.3bn, a figure the government risks exceeding unless a strong January tax intake materialises.
Commenting on the data, Treasury chief secretary James Murray said taxpayers’ money must be spent “wisely”, noting that around £1 in every £10 of public spending now goes on servicing debt — funds that could otherwise be directed toward public services.
