UK’s six-month borrowing falls, yet overshoots the forecast by £6bn

Britain’s public borrowing can improve and still disappoint. ONS figures released on October 21 show borrowing for the financial year through September was £4.4 billion below the same period last year, yet £6 billion above the Office for Budget Responsibility’s forecast. One comparison measures progress; the other measures how far plans have slipped. [3]

The same day’s inflation release adds pressure on spending power. Annual consumer price inflation rose from 3.1% in August to 3.5% in September. The BBC, reporting the ONS figures, attributed the acceleration to sharp increases in petrol and diesel prices. [6]

The increase is tangible at the pump: average petrol prices rose by 8.2 pence a litre between August and September, to 169.5 pence a litre, according to the figures reported by the BBC. [6]

For a hypothetical 50-litre petrol purchase, that monthly price increase adds £4.10: 50 litres multiplied by 8.2 pence per litre, then divided by 100 to convert pence into pounds. That assumes the same volume bought at each month’s reported average price; it is an illustration, not a measured household bill. [6]

For households, a higher fuel bill can leave less to spend elsewhere. For a hypothetical delivery business on fixed-price contracts, it could instead squeeze the margin on each job until prices or operations change. Passing the increase to customers may protect the supplier’s margin while transferring the pressure, rather than removing it.

A purely fuel-driven explanation is incomplete. ONS core CPI, which excludes energy, food, alcohol and tobacco, rose to 2.8% from 2.6% in August. That measure also accelerated, although one month cannot settle whether the increase will persist. [2]

The monthly borrowing picture was worse than the six-month comparison. Government borrowing reached £24.5 billion in September, £1.8 billion above a year earlier, the BBC reported from the ONS release. [6]

Debt interest needs its own explanation. ONS says that of the £10.9 billion payable in September, £4 billion reflected capital uplift on index-linked government bonds, largely because of the increase in the Retail Prices Index between June and July. That is a different inflation measure and period from the September CPI headline. [3]

That uplift accumulates in the accounts during the bond’s life, but is paid to holders as interest at redemption. The reported interest total therefore should not be read as an equivalent cash payment caused by September’s CPI increase. [3]

The strongest rival explanation to a lasting squeeze is that fuel volatility and the timing of interest accrual are making the latest figures look worse than the underlying trend. Lower financial-year borrowing than last year supports that caution. But higher core inflation and an overshoot against the fiscal forecast make it premature to dismiss the pressure as accounting and petrol alone.

The next Budget is due on October 28, according to the BBC. [6]

Watch that Budget’s borrowing assumptions, subsequent ONS borrowing deviations from forecast and the next core CPI reading. Easing core inflation alongside a shrinking forecast gap would weaken the lasting-squeeze interpretation. Continued underlying price pressure and persistent overshoots would strengthen it. Neither this release nor the forecast miss by itself determines a tax change or an interest-rate decision.