Public sector finances continued to deteriorate by more than expected in September. Overall net borrowing (PSNB) was £16.61 billion, well above the £10.3 billion consensus and also up on both August's downwardly revised £13.02 billion and the £14.48 billion recorded a year ago. This represents the third highest September borrowing on record. Note that since the reclassification of National Westminster bank as a private institution, borrowing excluding public sector banks (PSNB-X) now matches the total PSNB.

Total public sector spending increased £5.9 billion on the year as rises in debt interest and higher spending on public services were partially offset by reduced spending on benefits. Receipts were up only £3.8 billion although this was the steepest yearly gain in the last six months. Net debt was 98.5 percent of GDP, 0.3 percentage points below the August reading but still around the levels last seen in the early 1960s.

Borrowing in September was £1.5 billion more than forecast by the Office for Budget Responsibility and so again underscores the very real problems facing new Chancellor of the Exchequer Rachel Reeves as she compiles here Budget for 30 October. A probable sizeable increase in net taxes seems unavoidable without some redefining of fiscal targets. Today's update trims the UK RPI to minus 10 and the RPI-P to 17. Overall economic activity is still slightly underperforming but only due to the surprising weakness of prices.

Net borrowing is expected to fall from £13.73 billion in August to £10.3 billion in September.

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.