The UK government has already projected an additional £70 billion increase in borrowing for this financial year alone. By November, the cumulative total was £132.3 billion. This figure represents an increase of £10 billion from the same time last year — a sign of the deepening financial crisis. In November alone, government borrowing totalled £11.7 billion, well over the £10 billion that analysts had predicted.
These increasing levels of debt come as we have bad retail news showing that the consumer spending slump continues. The latest seasonally adjusted data shows that total sales volumes decreased by 0.1% in November. This drop runs counter to what analysts were expecting, with forecasts predicting a 0.4% boost. Supermarkets have really taken a beating – a fourth straight month of plummeting sales. After adjusting for inflation, retail sales were £1.9 billion lower in November than in the same month last year.
Retailers were counting on big Black Friday discounts to bring out the shoppers, but it didn’t go as retailers planned. Even with heavy promotions, sales for the five-day Black Friday shopping weekend fell below record highs set in previous years. Ongoing uncertainty around the changes coming in the Budget has shaken retailers’ and consumers plans, leading further to the drop in retail activity.
Rob Wood commented on the situation, stating, “The chaotic run-up to the Budget hit consumer spending, driving retail sales into two consecutive monthly falls after a run of four rises from June to September.” This popular store sentiment is indicative of the larger fear among consumers about their disposable income in the face of growing public debt and economic insecurity.
The government’s growing dependence on borrowing to finance spending has fueled worries about fiscal sustainability. A government official noted that “£1 in every £10 we spend goes on debt interest – money that could otherwise be invested in public services.” This short statement highlights the deep trade-offs between trying to hold down and manage debt while funding key services.
As the government grapples with its fiscal policies, Chief Secretary to the Treasury James Murray emphasized the need to “deliver on our pledge to cut debt and borrowing.” The administration is under growing pressure to spur economic growth at the same time it confronts its increasing borrowing and debt.