Britain recorded £10.9 billion in central-government debt interest payable in September, the highest September figure since monthly records began in 1997, adding pressure as Chancellor John Healey prepares his first Budget.
The Office for National Statistics (ONS) put public-sector net borrowing at £24.5 billion for September, £1.9 billion above the Office for Budget Responsibility’s (OBR) March forecast. Borrowing from April through September totaled £97.8 billion, £6 billion above the forecast profile. The ONS provisionally estimated public-sector net debt at £3.005 trillion, or 94% of gross domestic product, at the end of September. It said the measure had passed £3 trillion for the first time and cautioned that the estimate could be revised.
The September debt-interest figure is not adjusted for inflation. The ONS attributed £4 billion to capital uplift on index-linked gilts, largely reflecting a 0.6% increase in the Retail Prices Index between June and July. Because interest costs on those bonds move with the index, the monthly total does not isolate the effect of recent gilt-yield changes. Gilts are the government’s main borrowing instrument, and interest is paid to investors who hold them, the ONS said.
The OBR’s March forecast report also showed how much borrowing estimates can shift. Across its 10 most recent forecasts, the average absolute revision to fourth-year borrowing was £21 billion. Its largest revision since 2010 was £75 billion in November 2022, largely because of higher debt-interest and welfare spending.
Estimates of fiscal headroom against the stability rule for 2029–30 vary. HM Treasury’s account of the March forecast put the figure at £23.6 billion, while the Institute for Fiscal Studies (IFS) described about £20 billion as plausible. A Reuters poll of 19 economists had a median estimate of £10 billion to £12 billion. The OBR’s coming forecast will provide the next official assessment.
The IFS said UK gilt yields rose broadly in step with comparable markets and linked most of the increase to global inflation and interest-rate expectations. Its analysis put 30-year yields at 5.9% on Oct. 2, up from about 5.2% around the Spring Forecast; 10-year yields rose to 5.4% from 4.4% over the same period.
Reuters reported that a bank levy was being considered as a leading revenue measure and that temporary, targeted support for households was another possibility. Neither proposal has been confirmed. If adopted, the levy would place a cost on banks while eligible households would receive support.
Parliament has scheduled Healey’s Budget statement for about 8:30 a.m. EDT (12:30 p.m. GMT) Wednesday, Oct. 28. The OBR plans to publish its updated Economic and Fiscal Outlook after the speech.
