Britain’s public borrowing surged to a five-year high in September, as rising debt interest payments and increased welfare spending placed further strain on the nation’s finances.
According to data from the Office for National Statistics (ONS), public sector net borrowing reached £20.2 billion last month, an increase of £1.6 billion from the same period in 2024. It marks the highest September borrowing figure since 2020.
Despite a rise in tax receipts, the ONS reported that the gains were outweighed by soaring debt interest costs and higher welfare payments, both driven by persistent inflation. Economists surveyed by Reuters had forecast borrowing to reach £20.8 billion.
So far this financial year, the government has borrowed £99.8 billion, exceeding the Office for Budget Responsibility’s (OBR) March forecast by £7.2 billion. This is also the highest April–September borrowing total since the pandemic.
The figures pose a major challenge for Chancellor Rachel Reeves ahead of her 26 November budget, where she is expected to outline substantial tax increases to help restore fiscal stability.
Although revisions reduced total borrowing since April by £4.2 billion, the current budget deficit still hit £71.8 billion in the first half of 2025–26 — well above the OBR’s forecast of £58.8 billion.
While an increase in employer National Insurance contributions generated an additional £3.2 billion, government spending climbed by more than £10 billion, including a £3.8 billion rise in debt interest payments.
Martin Beck, Chief Economist at WPI Strategy, said that even with lower-than-expected borrowing, Reeves remains in a difficult position ahead of the autumn budget. He noted: “As things stand, total borrowing in 2025–26 could overshoot the OBR’s full-year forecast by about £10bn, pushing the deficit to close to 5% of GDP. That’s uncomfortably large for an economy operating near full employment and long past the shocks of the pandemic and energy crisis.”
PwC UK economist Nabil Taleb also warned that Reeves faces an “increasingly difficult balancing act” amid weaker growth, rising costs, and tightening fiscal headroom.
Consumer spending has stagnated throughout the year, as households grow cautious in anticipation of potential tax rises in the upcoming budget. Although borrowing costs on global markets have eased recently, the UK’s interest payments remain historically high. Annual borrowing is expected to surpass £100 billion this year, accounting for nearly 10% of total government spending.
Reeves is projected to face a deficit of between £20 billion and £40 billion when she presents the autumn budget. Alongside possible tax rises, she has indicated plans to revisit welfare reforms in response to the OBR’s downgraded productivity forecast.
The UK economy grew by just 0.1% in August, with July’s contraction leaving overall growth for the three months to August at 0.3%.
Chief Secretary to the Treasury James Murray said ministers were focused on “cutting waste, improving efficiency and transforming our public services for the future” in a bid to curb debt interest payments. He added: “This government will never play fast and loose with the public finances. We know that when you lose control of the public purse it’s working people who pay the price.”
However, Shadow Chancellor Mel Stride accused Reeves of losing control of the economy, saying: “If Rachel Reeves had a plan – or a backbone – she would stand up to her backbenchers, get spending under control and cut the deficit. Instead she is plotting to hike taxes yet again to pay for her failures.”
