LONDON--The U.K.'s budget deficit widened to its highest October in six years, suggesting British Treasury Chief George Osborne, who will present his autumn mini-budget announcement Wednesday, will have a hard time meeting his austerity targets this year.
The British public sector--excluding state-owned banks--borrowed 8.2 billion pounds ($12.54 billion), the Office for National Statistics said Friday, GBP1.1 billion more than in October 2014. Despite this rise, borrowing since the fiscal year started in April is still GBP6.6 billion lower than it was during the same period of last year.
The gulf widened in October because of lower tax receipts than a year ago and an increase in government spending--both departmental expenditure and benefit transfers.
This suggests Mr. Osborne, the Chancellor of the Exchequer, will struggle to keep his self-imposed commitment to reduce government borrowing to zero by 2020. According to estimates by the Office for Budget Responsibility--the U.K.'s independent fiscal watchdog--the Chancellor would have to borrow no more than GBP69.5 billion by March next year to be on track to meet his targets, but the Treasury has already borrowed more than three quarters of that amount.
In fact, when spending on public investment is excluded, the government deficit is already higher than the OBR's forecast for the whole 12 months to the end of March.
"We've learned there's no shortcut to fixing the public finances," a Treasury spokesperson said in a statement. "The job is not yet done and government borrowing remains too high."
While government coffers usually record a hefty surplus in January that would be able to bring borrowing numbers down again, analysts still foresee the OBR will raise its estimate for this fiscal year's budget deficit. The OBR's fresh array of forecasts will be released shortly after the Chancellor unveils his annual mini-budget--known as the Autumn Statement--in front of the British Parliament Wednesday.
Mr. Osborne is facing a complicated balancing act after Britain's upper chamber, the House of Lords, refused to approve his austerity plans in October. Even though the House of Lords' unelected lawmakers can only temporarily delay the lower chamber's decisions, the historic defeat drove Mr. Osborne to claim he was open to slow down the pace of the welfare cuts, while still pledging to curb borrowing enough to balance the books five years from now.
The government has claimed planned cuts to tax credits for low-income families will be offset by a rise in the national minimum wage, but economists at the Institute for Fiscal Studies, a London-based research institute, have published a study showing the losses inflicted would by far outweigh the gains of higher pay. However, Friday's figures give the Treasury much less space to maneuver.
Still, increases in private-sector earnings and robust employment figures lift the Chancellor's hopes that fatter tax receipts will help him curtail the budget deficit in the following months.
Write to Jon Sindreu at jon.sindreu@wsj.com and Jason Douglas at jason.douglas@wsj.com
