Chancellor Rachel Reeves faces mounting pressure over the UK's financial health, as new official data reveals government borrowing significantly outstripped forecasts last month, just days before the crucial Autumn Budget.
October Borrowing Figures Exceed Expectations
The Office for National Statistics (ONS) reported that public sector borrowing reached £17.4 billion in October. While this was £1.8 billion lower than the same month a year earlier, it represents the third highest October borrowing figure since modern records began.
This substantial sum was notably higher than the £15 billion most economists had predicted. More significantly, it overshot the £14.4 billion forecast made in March by the Office for Budget Responsibility (OBR), the UK's independent fiscal watchdog.
Looking at the broader financial picture, borrowing for the first seven months of the current financial year has climbed to £116.8 billion. This year-to-date figure is £9 billion higher than the same period last year and sits a worrying £9.9 billion above the OBR's March forecast.
Budget Implications and Political Reactions
The disappointing data arrives less than a week before Chancellor Reeves is set to deliver the Budget on November 26. She is widely expected to unveil a series of measures to address a black hole in the public finances, which some analysts estimate could be as large as £50 billion.
Although the government seems to have retreated from earlier reported plans to increase income tax, it is anticipated to seek alternative revenue streams. This is seen as essential for the Chancellor to remain compliant with her self-imposed fiscal rules.
Treasury Chief Secretary James Murray stated that the upcoming Budget would outline the government's plan to "cut debt". He emphasised the significant burden of debt interest, noting, "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."
In contrast, Shadow Chancellor Sir Mel Stride criticised the government's approach, stating, "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."
Underlying Economic Factors
The ONS provided some context for the figures. Public sector net debt, excluding the Bank of England, stood at £2.77 trillion at the end of October. This is approximately 90% of the UK's gross domestic product (GDP), a level not consistently seen since the early 1960s.
A slight silver lining was a decrease in debt interest payments, which fell by £900 million to £8.4 billion last month. The ONS attributed this decline to lower Retail Prices Index inflation, to which much of the government's debt is linked.
Furthermore, the year-on-year reduction in borrowing was partly aided by increased tax receipts, which helped counter higher public spending. A notable contributor was a £2.8 billion rise in National Insurance contributions, totalling £16.9 billion, following the hike in the rate paid by employers last April.
ONS chief economist Grant Fitzner commented, "While spending on public services and benefits were both up on October last year, this was more than offset by increased receipts from taxes and national insurance contributions."
Martin Beck, chief economist at WPI Strategy, offered a sobering outlook: "As things stand, total borrowing in 2025/26 could overshoot the OBR’s full-year forecast by around £10 billion." He warned that with little appetite for spending cuts, tax rises appear inevitable in the forthcoming Budget.
