Britain’s government borrowing rose to £18.3bn in August, overshooting official forecasts and intensifying pressure on Chancellor John Healey ahead of his October Budget.
The latest figures from the Office for National Statistics showed borrowing was £3.5bn above the Office for Budget Responsibility’s projection and £2.9bn higher than in August 2025. The increase was driven by government expenditure rising faster than tax receipts.
The figure also exceeded City expectations of about £15.6bn, highlighting the deteriorating fiscal position facing the government as it seeks to balance spending commitments with rising debt-servicing costs.
Borrowing for the first five months of the financial year has now reached £77.3bn. Although this is £2.2bn lower than during the same period last year, it is £8.1bn above the OBR’s forecast.
The cumulative total is less striking when measured against the size of the economy, ranking as the tenth-lowest April-to-August borrowing figure since comparable monthly records began in 1993. But the persistent divergence from official forecasts is likely to complicate the government’s efforts to establish how much room it has for tax and spending decisions at the Budget.
ONS senior statistician Tom Davies said: “Borrowing in the financial year so far was lower than over the same period last year.
However, it was higher than the official forecast, largely because central government borrowed more than anticipated.”
He added: “On the month, borrowing was up by almost a fifth on last August, as spending increased more than government income, partly reflecting the impacts of inflation.”
A further pressure point came from the cost of servicing the national debt. Government debt interest payments reached £8.8bn in August, the highest figure recorded for that month since monthly records began in 1997.
Of the total, £2.1bn was attributable to index-linked gilts, whose repayment costs are linked to the retail prices index measure of inflation.
The rising cost of servicing government debt leaves less fiscal capacity for public services and other priorities, including schools, hospitals and defence.
Susannah Streeter, chief investment strategist at Wealth Club, said the government’s fiscal constraints had become increasingly acute.
The Burnham fiscal bind has wound even tighter, giving him very little room for manoeuvre at the Budget,” she warned, adding that only minor adjustments were likely in late October given the lack of headroom for significant spending commitments.
She also cautioned that any perception of fiscal looseness could trigger a sharp reaction in bond markets, pushing gilt yields higher and further increasing the cost of government borrowing.
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