The 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) show that public sector borrowing hit £17.4 billion in October, down £1.8 billion on the same month last year but still the third-highest October total on record. Since April, borrowing has reached £116.8 billion, the second-highest level for the period since records began and almost £10 billion above the Office for Budget Responsibility’s forecast from the March Spring Statement.
The data comes at a crucial moment for Reeves, who is expected to announce tens of billions of pounds of tax rises next week. A planned rise in income tax was scrapped after revised OBR forecasts suggested the fiscal outlook had improved slightly, but the overall picture remains challenging.
James Murray, chief secretary to the Treasury, said rising debt-servicing costs were limiting resources for frontline public services.
“Currently we spend £1 in every £10 of taxpayer money on the interest of our national debt,” he said. “That money should be going to our schools, hospitals, police and armed forces.”
Murray said the Budget would set out “fair choices” to cut NHS waiting lists, reduce debt and tackle the cost of living.
The ONS said the government spent £8.4 billion servicing its debt in October, slightly down 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, helping offset increased spending on benefits and public services.
Economists warned the borrowing figures underline the tough backdrop Reeves faces. Pantheon Macroeconomics said the numbers would not affect the Budget itself, because the OBR forecasts are already finalised, but they “illustrate the difficult backdrop” confronting the Chancellor.
Capital Economics highlighted high local authority borrowing and surprisingly slow growth in tax receipts despite inflation-driven consumption rises.
The Institute for Fiscal Studies said 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 held steady at $1.30.
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Government borrowing overshoots forecast by £9.9bn, piling pressure on Reeves before Budget