Public sector finances deteriorated in September but by less than expected. Overall public sector net borrowing (PSNB) was £13.53 billion, up from August's revised £10.58 billion but nearly £5 billion less than the market consensus. It was also quite well short of the £15.08 billion posted a year ago. Excluding public sector banks (PSNB-X), the deficit stood at £14.35 billion versus £11.40 billion in August and £15.90 billion in September 2022. This was the sixth highest September borrowing since monthly records began in 1993.

The interest payable on central government debt was only £0.7 billion, some £7.2 billion less than in September 2022 and the third lowest on record. The drop was largely because of a sharp fall in debt service on index-linked gilts.

At £81.7 billion, the PSNB-X over the financial year to date was £15.3 billion larger than over the same period in FY2022/23 but still easily less than the £101.5 billion forecast made by the Office for Budget Responsibility (OBR) in March. Even so, public sector net debt (PSND-X) was £2,599.0 billion or around 97.8 percent of UK GDP. This was 2.1 percentage points higher than in September 2022 and sustains levels last seen in the early 1960s.

Today's update suggests that the government will have some wiggle room on spending ahead of the next general election but not much. Major fiscal giveaways remain unlikely. More generally, the September data put the UK RPI at minus 9 and the RPI-P at minus 29. Overall economic activity is undershooting market expectations.

Overall borrowing (PSNB) is seen at £18.2 billion, up from £10.76 billion in August and £15.08 billion a year ago.

The public sector net borrowing requirement (PSNB) is the difference between the sector's receipts and expenditure and so provides a simple measure of government fiscal policy. In response to the global economic crisis in 2008/09 the UK government introduced a number of measures designed to show the underlying state of public sector finances by omitting temporary distortions caused by financial interventions. It bases its fiscal policy on these measures. To this end, the underlying gauge of government borrowing watched most closely by financial markets is the PSNB-X which takes overall net borrowing (PSNB) but excludes public sector banks.

Changes in public sector finances can be used to determine the thrust of the government's fiscal policy. Generally speaking when the government has a rising deficit (or falling surplus) it is loosening its fiscal stance with a view to boosting economic activity. When its deficit is falling (or surplus rising), fiscal policy is being tightened in order to slow economic growth. However, sometimes changes in government financial positions can be due to factors outside of the government's control and do not signal an explicit shift in policy. This means that great care is needed in interpreting the data.