The U.K. government borrowed less in November than a year earlier, a sign that it may be making progress in its effort to contain a rise in debt that has worried bond investors and prompted a fresh round of tax rises.
The Office for National Statistics on Friday said the government borrowed 11.7 billion pounds ($15.66 billion) in November, 1.9 billion pounds less than in the same month a year earlier. It was the lowest total for a November since 2021.
That brought the total for the first eight months of the fiscal year to 132.3 billion pounds, 16.8 billion pounds above the amount projected by the Office for Budget Responsibility in March.
It was the highest total for borrowing in the first eight months of a fiscal year since 2020, when the government spent heavily on containing the Covid-19 pandemic.
The narrower November deficit was largely due to an increase in revenues following the government's decision to increase a tax on employment from April.
Governments around the world face pressing demands for higher spending as populations age, while many European countries are building up their militaries to counter a growing threat from Russia.
In the U.K., the cost of paying the state pension and other old-age benefits is expected to rise to 195.4 billion pounds in the fiscal year ending March 2031 from 161.2 billion pounds this year.
Those demands have made it difficult to roll back a surge in debt accumulated during the Covid-19 pandemic and as a result of providing support for households and businesses during the surge in energy and food prices that followed Russia's full-scale invasion of Ukraine in early 2022.
Treasury chief Rachel Reeves last month announced a series of further tax rises intended to ensure that the government meets its fiscal targets, which require that day-to-day spending is paid for from revenues rather than borrowing by the fiscal year ending March 2030.
Those measures appear to have reassured investors following a period of volatility in U.K. government bond markets. Yields on 10-year bonds have eased since the budget, having already fallen from a January peak of 4.9%.
The decline in yields partly reflects expectations that inflation will cool next year, paving the way for the Bank of England to lower its key interest rate, which has a big influence on borrowing costs throughout the economy, including those faced by the government.
The central bank Thursday cut its key rate to a near three-year low of 3.75%, and investors expect at least one more cut in early 2026, with the possibility of a larger fall if inflation cools more rapidly than policymakers had anticipated.
If sustained, that drop in yields will help the government lower its interest payments and its borrowing.
But further progress may be slow. The budget is based on projections for growth that seem optimistic to many economists, as well as improvements in productivity that won't be easy to secure.
"There are a lot of risks, just within the forecasts, and that probably points to more borrowing," said Sam Cartwright, an economist at Societe Generale.
Despite the recent fall in yields, doubts remain about the government's ability to stick to its plans. The rise in tax revenues announced in the budget mostly takes place in what is set to be an election year, and some question whether the government will follow through.
The government is now planning to borrow more as a share of economic output in the coming two fiscal years than it did before the November measures were announced, with the OBR forecasting a budget deficit of 3.5% of gross domestic product next year, and 3% the year after.
The European Commission expects the French government's deficit to be 4.9% next year, while Germany's deficit is seen at 4%.
In a separate release, the ONS said retail sales fell by 0.1% in November following a 0.9% drop in October, as consumers remained wary ahead of the budget and possible tax rises.