UK borrows £18bn in August, placing strain on Healey earlier than price range | Budget deficit
The UK authorities borrowed a higher-than-expected £18.3bn final month, rising the strain on John Healey as he makes an attempt to calm jittery bond trading floors earlier than subsequent month’s price range.
Some economists stated it was “inevitable” that the chancellor would want to boost taxes on 28 October if he’s to fulfill calls for for further spending on defence with out additional borrowing from buyers on global cash trading floors.
Official figures launched by the Office for National Statistics on Tuesday stated public sector internet borrowing – the distinction between authorities spending and revenue – was £2.9bn greater final month than in August 2025.
It meant that borrowing jumped by £3.5bn above the extent anticipated by the federal government’s impartial forecaster, the Office for Budget Responsibility (OBR), taking the deficit over the monetary 12 months to date to £77.3bn – £8.1bn above forecast.
The £18.3bn borrowed in August was additionally greater than the £15.6bn City analysts had forecast.
Healey, the chancellor, has promised to stay inside the authorities’s spending limits, which prohibit the quantity the Treasury can borrow as a proportion of nationwide revenue.
The August figures come after the federal government ran a larger-than-expected £1.8bn deficit in July, when analysts had anticipated the determine to be zero.
Thomas Pugh, the chief economist on the consultancy RSM UK, stated: “The leap in borrowing in August in comparison with final 12 months units the stage for what’s more likely to be a a lot trickier price range than Burnham or Healey anticipated once they got here to energy just some months in the past. Another spherical of tax rises in October now appears inevitable.”
The UK has been among the many international locations hardest hit by the rise within the rate of interest on authorities bonds amid turmoil in financial markets.
While the price of financing UK bonds has eased within the final week, the Treasury stays below strain to indicate it could cut back its reliance on heavy borrowing to keep up welfare spending.
On Tuesday, the yield – or rate of interest – on 10-year UK bonds rose three foundation factors (bps) to five.232%, whereas 30-year bond yields have been additionally 3bps greater at 5.729% in early buying and selling.
Chris Beauchamp, the chief market analyst at IG, stated: “The PM and chancellor might be feeling fairly claustrophobic right this moment because the partitions shut in round them. Borrowing prices hold climbing, whereas borrowing itself is outpacing the teeny rise in tax receipts.”
The Institute for Fiscal Studies, a thinktank, stated that since April, the federal government had spent £50bn on debt curiosity, £2bn greater than forecast by the OBR in March.
“On these forecasts – made earlier than the newest hikes in authorities rates of interest – debt curiosity was set to be greater than £100bn yearly over the subsequent 5 years,” stated Nick Ridpath, an IFS analysis economist.
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Central authorities spending on social safety advantages and pensions climbed by nearly £10bn greater than in the identical interval final 12 months – from £135.3bn to £145bn – largely in response to rising inflation.
The shopper costs indexrose last month to 3.1% and, whereas the Bank of England held rates of interest at its newest assembly final week, the central financial institution warned that the price of borrowing could must rise within the coming months if inflationary pressures persist.
Martin Beck, the chief economist on the consultancy WPI Strategy, stated: “Today’s public finance figures are one other unwelcome setback for the federal government forward of subsequent month’s price range.”
The International Monetary Fund has urged western governments to realize larger management over their public funds to reassure monetary trading floors that they continue to be secure havens for lenders.
Emma Reynolds, the chief secretary to the Treasury, stated the federal government was dedicated to bettering the UK’s financial progress, “however we are able to solely ship that progress with fiscal self-discipline”.
She added: “At a time when debt curiosity prices billions of kilos that might in any other case be spent on bettering lives, we should all the time know the place the cash is coming from to pay for public companies.”
The Conservative occasion Treasury spokesperson, Andrew Griffith, accused Labour of shedding management of the general public funds. “They are borrowing a lot they’ve overshot the OBR forecast by an additional £8bn of debt,” he stated.
“It takes a uncommon fiscal incontinence to each have the best tax soak up historical past and see borrowing nonetheless shoot up.”
However, the OBR has stated estimates of presidency borrowing printed early within the monetary 12 months must be thought-about provisional and they’re more likely to be revised.
