U.K. Public Finances Could Upend Arithmetic for Government Budget — Market Talk

The jump in U.K. public net borrowing in August compared with last year sets the stage for a much trickier budget announcement than new Prime Minister Andy Burnham or Treasury Chief John Healey anticipated when they came to power a few months ago, RSM's Thomas Pugh says. "Another round of tax rises in October now looks inevitable," he says in a note. At 77.3 billion pounds, cumulative borrowing this financial year is running well ahead of the OBR budget watchdog's forecast of 69.2 billion pounds. Given rising inflation and likely spending increases in the budget, borrowing is set to continue to run significantly ahead of forecasts, Pugh says. However, with gilt yields elevated, investors are watching every borrowing number for clues about how seriously the government takes fiscal discipline, he notes. (edward.frankl@wsj.com)