The UK government borrowed £18 billion in August, far more than expected, adding pressure on the Treasury ahead of the autumn budget.
Figures from the Office for National Statistics (ONS) revealed that public sector net borrowing – the gap between government spending and income – was £3.5 billion higher than in the same month last year. It also exceeded City forecasts of £12.75 billion and the Office for Budget Responsibility’s (OBR) prediction of £12.5 billion.
Grant Fitzner, the ONS’s chief economist, said borrowing was at its highest August level since the Covid crisis. He explained: “Although overall tax and national insurance receipts were noticeably up on last year, these increases were outstripped by higher spending on public services, benefits and debt interest.”
Upward revisions to earlier months pushed total borrowing for the financial year so far to £83.8 billion, £16 billion higher than the same period in 2024 and above the OBR’s forecast of £72.4 billion.
Chancellor Rachel Reeves is expected to outline tax rises in her 26 November budget to tackle what some estimates suggest could be a £40 billion deficit.
James Murray, chief secretary to the Treasury, insisted the government had a clear strategy. He said: “This government has a plan to bring down borrowing because taxpayer money should be spent on the country’s priorities, not on debt interest. Our focus is on economic stability, fiscal responsibility, ripping up needless red tape, tearing out waste from our public services, driving forward reforms, and putting more money in working people’s pockets.”
But Labour has come under attack from the opposition. Shadow chancellor Mel Stride said: “Keir Starmer and Rachel Reeves are too weak and distracted to take the action needed to reduce the deficit. The chancellor has lost control of the public finances, and Labour’s weakness means much needed welfare reforms have been abandoned.”
The figures come a day after the Bank of England held interest rates at 4% and slowed its bond-selling programme to avoid unsettling markets. Britain’s long-term borrowing costs have reached their highest level in 27 years, driven by global pressures and concerns over the strength of the UK economy. The Bank’s policy of quantitative tightening, which reduces its holdings of government bonds, has also contributed.
Rising debt servicing costs remain a major challenge. The ONS said central government debt interest reached £8.4 billion in August, almost £2 billion higher than a year earlier.
Nabil Taleb, economist at PwC UK, warned: “Months of high borrowing and the political challenge of cutting spending have all but wiped out the chancellor’s headroom. Gilt yields, the effective cost of financing government debt, have also surged this month to their highest level in decades. Broader economic conditions are offering little relief.”
