Higher than expected borrowing figure have put more pressure on Chancellor Rachel Reeves ahead of next week’s Budget as stock markets also panicked over lofty valuations and the strength of economies on both sides of the Atlantic.
The Office for National Statistics (ONS) said public sector borrowing stood at £17.4 billion last month, £1.8 billion lower than a year ago but the third highest level for October since records began in 1993.
The figure was more than the £15 billion expected by most economists and higher than the £14.4 billion forecast in March by the UK’s independent fiscal watchdog, the Office for Budget Responsibility (OBR).
Treasury Chief Secretary James Murray said next week’s Budget would set out how Ms Reeves intends to “cut debt”.
He said: “Currently, we spend £1 in every £10 of taxpayer money on the interest of our national debt. That money should be going to our schools, hospitals, police and armed forces.
“That is why we are set to deliver the largest primary deficit reduction in both the G7 and G20 over the next five years – to get borrowing costs down.”
Shadow chancellor Sir Mel Stride said Labour should focus on cutting spending to avoid tax rises in the Budget.
“If Labour had any backbone, they would control spending to avoid tax rises next week.”
Share prices slumped in early trade following heavy losses on Wall Street, as worries about AI valuations and US growth rattled markets yet again.
Kathleen Brooks, research director at XTB, said: “The premise for stocks on Thursday was strong: Nvidia’s results were stunning, and the US unemployment rate rose, sparking hope that the FOMC may consider a rate cut next month.
“However, there was a categorical reversal in sentiment, stocks plunged, intra-day volatility surged to its highest level since April, and Nvidia’s share price shed 3%. Stocks are now on track to register their worst week since President Trump’s tariff plan ripped through markets back in April.
“Unlike the April sell off, when President Trump’s tariff threats caused chaos on global markets, there is no single driver of the November sell off. There are concerns that the US economy will slow, the Fed won’t cut rates, and the market is still having an existential crisis about lofty valuations for AI stocks.
“A large fear is that the AI spending frenzy may not generate the returns needed to justify the investments, which is why tech stocks have been hammered this month.
“It was easier to recover from the tariff slump in stocks, since one man, President Trump, had to do one thing, reduce tariffs, for stocks to recover.
“This time it’s different. There is no single thing that needs to change, the market instead has buyer’s remorse over pushing tech stock valuations too high, and this will take time to work its way out of the system.”
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