UK Borrowing Jumps in December as Debt Interest Climbs

• Britain experienced a bigger-than-expected budget deficit in December, swelled by debt interest costs and a one-off purchase of military homes, according to official data that underlined the fiscal pressure faced by finance minister Rachel Reeves.
• Public sector net borrowing was 17.8Bn pounds ($22Bn) in December, more than 10.0Bn pounds higher than a year earlier, the Office for National Statistics said on Wednesday. Economists polled by Reuters had a median forecast of 14.1Bn pounds for headline public sector net borrowing.
• Since the Oct. 30 budget that raised borrowing and increased tax on employers to help restore public services and investment, economic and financial data has largely turned against Reeves, adding to the likelihood that she will need to do more to meet the government's self-imposed fiscal rules. Reeves, speaking with Bloomberg on the sidelines of the World Economic Forum's annual meeting in Davos, Switzerland, said Britain's public finances were now in order but she would continue to take decisions to meet the fiscal rules.
• Earlier this month, a sharp sell-off in British government bonds, driven to a large degree by shifts in U.S. interest rate expectations, forced Reeves to say she would act to meet the government's fiscal rules.
• These include balancing day-to-day spending with revenues by the end of the decade and for public sector net financial liabilities to decline as a proportion of gross domestic product. However, market borrowing costs have fallen in the last week and as at Tuesday, British gilts were the third best-performing bonds among the Group of Seven countries this year.

(Source: Reuters)