Oh dear, oh dear.

Not good ahead of Chancellor George Osborne’s highly anticipated UK spending review later on Wednesday.

The Office of National Statistics has just provided the following statement regarding the state of UK public finances:

Via Reuters:

RTRS – UK SEPT PSNCR 20.736 BLN STG (CONS. 15.65 BLN) vs 19.180 BLN STG SEPT 2009, HIGHEST FOR SEPT SINCE RECORDS BEGAN IN 1984

RTRS-UK SEPT PSNB 15.607 BLN STG (CONS. 14.2 BLN) VS 14.806 BLN STG SEPT 2009, HIGHEST FOR SEPT SINCE RECORDS BEGAN IN 1993

RTRS-UK SEPT PSNB EX FINANCIAL-SECTOR INTERVENTION 16.166 BLN STG VS 15.461 BLN STG SEPT 2009, HIGHEST FOR SEPT SINCE RECORDS BEGAN IN 1993

RTRS-UK CUMULATIVE APRIL-SEPT PSNCR 64.911 BLN STG VS APRIL-SEPT 2009 74.688 BLN

RTRS-UK CUMULATIVE APRIL-SEPT PSNB 70.156 BLN STG VS APRIL-SEPT 2009 75.145 BLN

RTRS-UK CUMULATIVE APRIL-SEPT PSNB EX FINANCIAL-SECTOR INTERVENTIONS 73.548 BLN STG VS APRIL-SEPT 2009 77.376 BLN STG

So, just to be clear, that’s UK’s public sector net cash requirement hitting £20.736bn in September, against expectations of about £15bn — making it the highest cash requirement in that month since records began in 1984.

More importantly though, the actual public sector net borrowing figure hit £15.607 — also the highest for September since records began (this time in 1993) — against an expectation of £14.2bn. Although, that comes against a revision to the previous August figure — which at the time also struck a record for the month — to £14.239 from £15.9bn.

August, though, is usually seen as a hard month for the public coffers due to low corporate tax takes in the month.

To put the overall picture in perspective, however, the ONS provides this handy chart:

George Osborne, of course, is looking to meet a general target for the Public Sector Net Borrowing Requirement of £149bn in  2010/11.

At which point it’s worth reminding Standard & Poor’s warning about the UK’s AAA rating back in July, when it decided to keep the rating intact, but maintain a negative outlook:

– In our view, a number of large and politically challenging spending decisions are still to be made, and Standard & Poor’s medium-term economic forecasts for the U.K. are less optimistic than the assumptions underlying the budget. We therefore believe there is still a material risk that the U.K.’s net general government debt burden may approach a level incompatible with the ‘AAA’ rating.

So just that little more pressure on Mr. Osborne on Wednesday — coverage of which you can keep up with at FT.com’s specially dedicated Spending review 2010 sub-site.

[Update: 13:00 BST}

Here's some comment from Howard Archer at Global Insight (his emphasis):

The public finances were worse than expected in September and disappointingly showed deterioration compared to a year earlier, thereby highlighting the need for the Chancellor to rein in public spending.

The Public Sector Net Borrowing Requirement excluding financial interventions rose to £16.2 billion in September. This was a record shortfall for the month and up from £15.5 billion a year ago. At least though, the public finances still show modest overall improvement during fiscal year 2010/11. Specifically, the PSNBR narrowed to £73.5 billion during April-September from £77.4 billion a year earlier. Consequently, Chancellor George Osborne may still be able to meet his target PSNBR of £149 billion in 2010/11, although much will depend on how well economic growth holds up over the rest of the financial year. If the current rate of overall improvement was replicated over the whole fiscal year, the PSNBR would come in at £148 billion.

Tax receipts are benefiting from the economy's return to growth since the fourth quarter of 2009 and from Value-Added Tax rising back up from 15.0% to 17.5% in January. The marked improvement in growth in the second quarter helped matters, although economic activity has clearly moderated appreciably since then. For example, VAT receipts were up 17.2% year-on-year in September. However, the year-on-year increase in income and capital gains tax receipts slowed to a disappointing 1.5%. In addition, unemployment benefit claims have fallen by 154,700 overall from last October's 12-year high of 1.6278 million, which is helping to limit the rise in public expenditure.

A serious problem for the government though is that interest payments are increasing markedly. Indeed, the breakdown of central government expenditure shows interest payments were up to £2.3 billion in September from £912 million a year earlier - an increase of 155%. The government will highlight this as a key reason to why there should be no delay in enacting measures to improve the public finances.

Related links: This entry was posted by Izabella Kaminska on Wednesday, October 20th, 2010 at 10:36 and is filed under Capital markets, People. Tagged with george osborne, Office of National S, UK, UK Spending Review, UK treasury. Edit this entry.