The Office for National Statistics (ONS) has revealed that government borrowing has been overstated by a cumulative £3bn due to errors in VAT receipts data supplied by HM Revenue and Customs (HMRC). The mistake, which affected monthly estimates by £200m-£500m since January, provides Chancellor Rachel Reeves with slightly more fiscal headroom ahead of her November budget.
The ONS said public borrowing for the fiscal year ending March 2025 was £1bn lower than previously reported, and borrowing from April to August was £2bn lower. The corrected figures show borrowing in the first five months of the current fiscal year stood at £81.8bn, down from the £83.8bn published in September. However, the current budget deficit excluding investment remained at £60bn, significantly above the OBR's forecast of £46.6bn.
HMRC acknowledged the error, stating that VAT cash receipts from April to August 2025 had been increased by £2.4bn. The ONS will incorporate the full revisions in the next public finances release on 21 October. The correction comes as Reeves prepares to announce tax rises to address a spending gap estimated at £20bn-£40bn, amid expected productivity downgrades and policy reversals.
The error is the latest in a series of data quality issues that have plagued UK economic statistics since the pandemic. Bank of England Governor Andrew Bailey has previously described unreliable ONS data as a “substantial problem” for policymakers. Rob Wood, economist at Pantheon Macroeconomics, advised treating official data “with a pinch of salt for now”.
