The UK government has borrowed £9.9 billion more than expected so far this fiscal year, intensifying the economic pressure on Chancellor Rachel Reeves as she prepares to deliver next week’s Budget.
New figures from the Office for National Statistics (ONS) reveal that public sector borrowing hit £17.4 billion in October, a decrease of £1.8 billion compared to the same month last year, yet still the third-highest October total on record.
Since April, borrowing has reached £116.8 billion, marking the second-highest level for this period since records began and nearly £10 billion above the Office for Budget Responsibility’s forecast from the March Spring Statement.
This data arrives at a pivotal moment for Reeves, who is anticipated to announce substantial tax increases next week. Although a planned rise in income tax was abandoned following revised OBR forecasts suggesting a slight improvement in the fiscal outlook, the overall economic scenario remains challenging.
James Murray, Chief Secretary to the Treasury, stated that rising debt-servicing costs are constraining resources for frontline public services. “Currently we spend £1 in every £10 of taxpayer money on the interest of our national debt,” he remarked. “That money should be going to our schools, hospitals, police and armed forces.” Murray added that the Budget would outline “fair choices” aimed at reducing NHS waiting lists, decreasing debt, and addressing the cost of living.
The ONS reported that the government spent £8.4 billion on servicing its debt in October, a slight decrease from £9.3 billion a year earlier. Grant Fitzner, the ONS’s Chief Economist, noted that tax and National Insurance receipts were higher than last year, which helped to offset increased spending on benefits and public services.
Economists have warned that the borrowing figures underscore the challenging situation Reeves faces. Pantheon Macroeconomics indicated that while the numbers would not directly impact the Budget itself, given that the OBR forecasts are already finalised, they “illustrate the difficult backdrop” confronting the Chancellor. Capital Economics highlighted high local authority borrowing and unexpectedly slow growth in tax receipts despite inflation-driven consumption rises. The Institute for Fiscal Studies remarked that the latest data “highlights uncertainty around tax revenues, pressures on public spending, and stubbornly high costs of servicing government debt.”
Following the announcement, yields on ten-year UK government bonds fell to 4.5 per cent, while sterling remained steady at $1.30.
