Chancellor Rachel Reeves has been dealt a further blow as government borrowing surged by a quarter to a higher-than-expected £24.3 billion last month, driven by record debt interest costs, official figures have shown.
The Office for National Statistics (ONS) reported that borrowing was £4.9 billion higher than a year earlier, reaching the second highest April level on record, surpassed only during the Covid-19 pandemic era when borrowing skyrocketed. It also exceeded the £20.9 billion forecast by the Office for Budget Responsibility (OBR) by £3.4 billion.
Interest costs on government debt hit £10.3 billion, a record for April and £900 million more than a year ago, as rising inflation impacted index-linked gilts. The ONS also revised down borrowing for the financial year to March by £3 billion to £129 billion, a 15% decrease or £22.8 billion lower than the previous year, due to regular updates to central government data.
Grant Fitzner, ONS chief economist, said: "Borrowing this month was substantially higher than in April last year and although receipts increased compared with April 2025, this was more than offset by higher spending on benefits and other costs. Borrowing for the latest full financial year was revised down slightly, and on a comparable basis remains the lowest since the year ending March 2020."
Experts noted that higher-than-planned welfare spending also contributed to the increase in April borrowing. They warned that debt interest costs are likely to keep rising in the coming months as inflation is sent soaring by the Iran war and UK government bonds, known as gilts, remain under pressure amid economic and political uncertainty.
Gilt yields have reached levels not seen for decades in recent weeks due to concerns over the UK economic outlook and the prospect of a challenge to Prime Minister Sir Keir Starmer's leadership. Yields move inversely to bond prices, meaning gilt prices fall when yields rise.
Rob Wood, chief UK economist at Pantheon Macroeconomics, said: "We estimate that debt interest costs in 2026/27 will be about £15 billion higher than assumed in the budget if gilt yields hold at current levels for the rest of the year. Headroom against the fiscal rules would be cut by closer to £10 billion if half the rise in yields since the budget is sustained until 2029-20. As best we can tell, political risk has added 20 to 40 basis points to gilt yields and we suspect will keep borrowing costs more elevated than they otherwise would be this year."
