Rachel Reeves suffered a fresh blow today after government borrowing rose to the highest level in four years.
As the Chancellor woos the business elite in Davos, official figures showed the public sector making another attempt £17.8 billion last month – even more than analysts expected.
The level was the third highest ever in December, £10.1 billion more than the same month last year.
The ONS said this figure was largely boosted by rising interest payments on debt, which rose £3.8 billion year-on-year, while spending also rose.
Official figures show the public sector built up a further £17.8 billion in borrowing last month – even more than analysts expected
The figures were released as the chancellor wooed the business elite in Davos
Borrowing is ahead of the OBR watchdog's forecasts
Loans in the financial year to date stand at £129.9 billion, £8.9 billion more than the same period a year earlier and the second highest borrowing in the financial year to December since inception of monthly records – surpassed only by the massive borrowing at the height of the pandemic in 2020.
Last year, £4.1 billion more was borrowed than the £125.9 billion forecast by the watchdog Office for Budget Responsibility (OBR).
It comes after volatility in the UK government bond market at the start of the year, which sent public sector borrowing costs soaring and raised fears that Ms Reeves is on track to flout her fiscal rules.
Jessica Barnaby, ONS deputy director of public finance, said: 'At almost £18 billion, borrowing last month was the third highest on record in December.
'Compared to December 2023, spending on public services, benefits, interest on debt and capital transfers all increased, while an increase in tax revenues was partly offset by a reduction in national insurance contributions, following interest rate cuts earlier in 2024.'
Finance Minister Darren Jones said: “Economic stability is critical to our most important mission: delivering growth. That is why our fiscal rules are non-negotiable and we will have an iron grip on public finances.
'Through our expenditure overview, we will interrogate every line of government expenditure for the first time in seventeen years.'
The ONS said the figure was largely driven up by rising interest payments on debt, which rose £3.8 billion year-on-year
