Britain's public sector net borrowing rose to £18.3 billion in August, beating every forecast in a Reuters poll of economists and marking the highest August figure outside the pandemic. The overshoot piles pressure on Chancellor John Healey as he prepares an October 28 Budget already squeezed by rising debt costs.
Britain's public sector net borrowing rose to £18.3 billion in August, nearly a fifth higher than a year earlier and the highest for the month outside the pandemic. The figure came in above all forecasts in a Reuters poll of economists, which had pointed to a £15.5 billion deficit.
The shortfall was £3.5 billion above the Office for Budget Responsibility's forecast, as higher spending more than offset stronger tax receipts. Central government spending ran £2.3 billion above the OBR's projection, while receipts came in £0.2 billion higher than expected.
Fiscal Year Deficit Widens Above Forecast
Borrowing for the financial year to August totalled £77.3 billion, down £2.2 billion from the same period last year but £8.1 billion above the OBR's March forecast. The current budget deficit stood at £51.9 billion year to date, again higher than the OBR's £47.1 billion forecast.
An ONS statistician said tax receipts had looked strong, but rising government spending on goods and services and inflation-linked welfare benefits offset the gain.
Debt-Servicing Costs Hit a Record August High
Debt interest payments reached £8.8 billion in August, the highest for the month since records began in 1997. Of that, £2.1 billion reflected the capital uplift on index-linked gilts after a 0.3% rise in the Retail Prices Index between May and June.
Capital Economics economist Ruth Gregory said debt interest payments are on track to hit 3.8% of GDP in the 2026-27 fiscal year, well above the 2.1% average of the 2010s.
Pressure Builds Ahead of the October Budget
Many economists expect the OBR to halve Healey's fiscal headroom against his main borrowing rule when it reports ahead of the October 28 Budget; the margin stood at just under £24 billion in March. Conservative shadow chancellor Andrew Griffith said Labour had "lost control of the public finances."
Public sector net debt stood at £2,985.5 billion at the end of August, though as a share of GDP it fell to 93.8% from 95.1% a year earlier, its lowest level since the early 1960s.
Sources: Economic Indicators News (Investing.com), Economy News (Investing.com), Financial Times
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