Chancellor Rachel Reeves faces intensified pressure over the UK's financial health as new data reveals government borrowing significantly exceeded expectations last month, just days before her pivotal Budget announcement.
Budget Blow as Borrowing Overshoots
The Office for National Statistics reported that public sector borrowing reached £17.4 billion in October, creating a substantial challenge for the Treasury. While this figure represents a £1.8 billion reduction compared to the same month last year, it marks the third highest October borrowing level since records began.
The actual borrowing substantially outpaced predictions, coming in well above the £15 billion most economists had anticipated and significantly higher than the £14.4 billion forecast made in March by the Office for Budget Responsibility, the UK's independent fiscal watchdog.
Wider Financial Picture Emerges
The concerning trend extends beyond a single month. Borrowing for the first seven months of the current financial year has reached £116.8 billion, representing approximately 3.9% of the UK's total economic output.
This year-to-date figure stands £9 billion higher than the same period last year and exceeds the OBR's March forecasts by nearly £10 billion, painting a challenging fiscal landscape for the Chancellor.
The timing of this revelation is particularly awkward, with the data emerging less than a week before the November 26 Budget. Ms Reeves is expected to unveil comprehensive measures to address what some economists estimate could be a £50 billion black hole in the UK's public finances.
Political Reactions and Economic Analysis
Treasury Chief Secretary James Murray emphasised that next week's Budget would outline the government's strategy to "cut debt," highlighting that £1 in every £10 of taxpayer money currently services the national debt interest. "That money should be going to our schools, hospitals, police and armed forces," he stated.
Meanwhile, Shadow Chancellor Sir Mel Stride criticised the government's approach, asserting that "borrowing so far this year has been the highest on record outside the pandemic" and urging spending control to avoid tax increases.
Economic experts provided sobering analysis. Martin Beck, chief economist at WPI Strategy, warned that total borrowing for 2025/26 could overshoot OBR forecasts by around £10 billion, potentially pushing the deficit close to 5% of GDP. He noted that the Chancellor's "headroom against her fiscal rules has almost certainly vanished" and predicted that "tax rises are inevitable."
The ONS data did contain some positive elements, including a £900 million reduction in debt interest payments to £8.4 billion last month, largely driven by falling inflation. Additionally, increased tax receipts, particularly a £2.8 billion rise in National Insurance contributions following April's rate hike for employers, helped offset higher public spending.
As the Budget approaches, all eyes remain on how the Chancellor will navigate these challenging fiscal waters while maintaining her commitment to fiscal responsibility and public service funding.
