UK government borrowing for October exceeded forecasts, reaching £17.4 billion, intensifying fiscal pressures ahead of Chancellor Rachel Reeves’ budget next week. The unexpected deficit adds to concerns over public finances and could influence tax and spending decisions.
In October, the Office for National Statistics reported that government borrowing was £17.4 billion, surpassing analysts’ predictions of around £15 billion. This figure represents the difference between public spending and tax revenues, and it was the third-highest October borrowing since monthly records began in 1993. Although it was £1.8 billion lower than in October 2024, the overshoot highlights persistent fiscal strains. For the financial year to date, borrowing totaled £116.8 billion, which is £9 billion more than the same period last year, marking the second-highest April-to-October borrowing on record after the pandemic year of 2020.
The timing of this data is critical, as it provides the final snapshot of public finances before Chancellor Rachel Reeves presents her budget on November 26. Reeves has committed to strict fiscal rules, including balancing the current budget by the end of the parliament and reducing government debt as a share of national income. The unexpected borrowing increase complicates these goals, with the Office for Budget Responsibility reportedly estimating a £20 billion gap that needs to be addressed through tax rises or spending cuts.
Economists have expressed concern over the figures. Ruth Gregory, deputy chief UK economist at Capital Economics, noted that the combination of higher borrowing and falling retail sales paints a “pretty grim picture” of the UK economy. Nick Ridpath, a research economist at the Institute for Fiscal Studies, emphasized the uncertainty in forecasts and advised that the chancellor should create more fiscal headroom to mitigate risks, as operating with minimal margin is risky.
Accompanying the borrowing data, retail sales fell by 1.1% in October, the first decline since May, according to the ONS. Some retailers suggested that consumers were delaying purchases in anticipation of Black Friday deals, indicating weakened consumer confidence. This drop in sales further compounds economic worries, as it signals potential sluggishness in household spending, which is a key driver of growth.
Politically, the figures have sparked reactions from both sides. Shadow chancellor Mel Stride criticized the government, stating that if Labour had “any backbone,” they would control spending to avoid tax rises. In response, Treasury officials like James Murray highlighted that £1 in every £10 of taxpayer money is spent on debt interest, money that could otherwise fund public services like schools and hospitals. Murray reaffirmed the government’s commitment to delivering the largest primary deficit reduction among G7 and G20 nations over the next five years.
Looking ahead, all eyes are on the budget, where Reeves is expected to announce significant tax increases and possibly spending measures to shore up public finances. The bond markets are closely monitoring the chancellor’s ability to maintain fiscal discipline, as any misstep could affect gilt yields and borrowing costs. The outcome will shape the UK’s economic trajectory and public service funding in the coming years.
