Public sector finances deteriorated slightly more than expected in October. Overall public sector net borrowing (PSNB) was £13.97 billion, little changed from September's upwardly revised £13.72 billion but about £1.0 billion larger than the market consensus. Moreover, the outturn compared with borrowing of just £9.41 billion in October 2022. Excluding public sector banks (PSNB-X), the deficit stood at £14.90 billion after £14.62 billion in the previous month and £10.46 billion a year ago. This was the second highest October borrowing since records began in 1993.

Central government's receipts were £76.9 billion or £2.5 billion higher than in last October and £1.5 billion more than the £75.4 billion forecast by the Office for Budget Responsibility (OBR) in March 2023. Total expenditure was £99.6 billion, fully £13.7 billion more than a year ago and £5.5 billion higher than the £94.1 billion OBR forecast.

Combined, this left public sector net debt (PSND-X) at £2,643.7 billion or around 97.8 percent of UK GDP. This was 2.3 percentage points higher than in October 2022 and sustains levels last seen in the early 1960s.

At £98.3 billion, the PSNB-X over the financial year to date was £21.9 billion larger than over the same period in FY2022/23. However, ahead of tomorrow's Autumn Statement, the government will be keen to point out that it was still some £16.9 billion less than forecast by the OBR. Consequently, today's update will leave speculators contemplating at least some net tax cuts in Wednesday's announcement. It also puts the UK RPI at minus 19 and the RPI-P at minus 15. Overall economic activity is undershooting market expectations.

Overall net borrowing (PSNB) is seen declining from £13.53 billion to £12.9 billion.

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.