Chancellor Rachel Reeves faces mounting pressure over the UK's financial health as new data reveals government borrowing significantly exceeded expectations last month, creating a challenging backdrop for the upcoming Budget.
October Borrowing Surpasses Predictions
The Office for National Statistics reported that public sector borrowing reached £17.4 billion in October, representing a reduction of £1.8 billion compared to the same month last year but marking the third highest October borrowing level since records began.
This figure substantially outpaced economists' consensus forecast of £15 billion and exceeded the £14.4 billion prediction made in March by the Office for Budget Responsibility, the UK's independent fiscal watchdog.
Looking at the broader financial picture, borrowing for the first seven months of the current financial year totalled £116.8 billion, equivalent to approximately 3.9% of the nation's economic output.
Budget Implications and Fiscal Challenges
The concerning data emerges less than a week before Chancellor Reeves delivers her Budget on November 26, where she's expected to outline measures to address a substantial shortfall in public finances that some economists estimate could reach £50 billion.
Year-to-date borrowing figures show a £9 billion increase compared to the same period last year and stand £9.9 billion above the OBR's March projections.
Treasury Chief Secretary James Murray emphasised the government's commitment to reducing debt, stating: "Currently, we spend £1 in every £10 of taxpayer money on the interest of our national debt. That money should be going to our schools, hospitals, police and armed forces."
Political Reactions and Economic Context
Shadow chancellor Sir Mel Stride criticised the government's approach, asserting: "Borrowing so far this year has been the highest on record outside the pandemic. If Labour had any backbone, they would control spending to avoid tax rises next week."
The ONS reported some positive developments, including a £400 million downward revision to borrowing figures for the first half of the financial year and a reduction in debt interest payments by £900 million to £8.4 billion last month, largely due to falling inflation.
Public sector net debt, excluding Bank of England liabilities, reached £2.77 trillion at the end of October, representing around 90% of GDP and slightly below last year's level, though remaining at heights not seen since the early 1960s.
ONS chief economist Grant Fitzner noted that while spending on public services and benefits increased compared to October last year, "this was more than offset by increased receipts from taxes and national insurance contributions."
Economist Martin Beck from WPI Strategy warned that with current trends, total borrowing for 2025/26 could exceed OBR forecasts by approximately £10 billion, pushing the deficit close to 5% of GDP and potentially eliminating the Chancellor's fiscal headroom.
