UK government borrowing has surged to its second-highest level on record for the first eight months of the financial year, highlighting the scale of the fiscal challenge facing Chancellor Rachel Reeves.
Figures from the Office for National Statistics (ONS) show that the government borrowed £132.3 billion between April and November, £10 billion more than during the same period last year. Only 2020, when emergency spending during the Covid-19 pandemic pushed borrowing to historic levels, recorded a higher total for that stretch of the year.
Borrowing in November alone was £11.7 billion, down £1.9 billion from a year earlier and the lowest November figure since 2021. However, earlier months were revised upwards by nearly £4 billion, reinforcing the ongoing pressure on public finances.
Tom Davies, senior statistician at the ONS, said November’s drop offered some relief but that the overall trend remained challenging. “The main reason for the fall from last year was increased receipts from taxes and National Insurance contributions,” he explained. “However, across the financial year to date as a whole, borrowing remains higher than last year.”
Markets reacted cautiously, with the yield on the benchmark ten-year gilt rising to 4.5 per cent and sterling slipping slightly against the dollar.
Tax revenues for the period rose sharply to £516 billion, an increase of £25 billion, driven by a £21 billion rise in National Insurance contributions and a £14 billion boost in income tax receipts. Spending, however, grew even faster, climbing £55 billion to £736 billion, largely due to a £15 billion increase in benefit payments.
Since taking office, Reeves has raised employer National Insurance contributions by £25 billion and extended a freeze on income tax thresholds, measures aimed at rebuilding fiscal headroom. The Office for Budget Responsibility estimates these policies helped create £22 billion in fiscal space, although much of the impact of additional tax rises will only be felt later in the forecast period.
Economists warn the public finances remain fragile. Elliott Jordan-Doak, senior UK economist at Pantheon Macroeconomics, described the reliance on back-loaded tax rises as evidence of “shaky foundations.” Sandra Horsfield at Investec added that progress in reducing the deficit was “a little slower than hoped,” despite stronger revenues.
The ONS said the current budget deficit stood at £93 billion over the eight-month period, £7 billion higher than a year earlier. Public sector net debt reached 85 per cent of GDP in November, up 2.7 percentage points on the year. Debt interest payments fell to £3.4 billion in November from £9 billion in October, but are expected to exceed £100 billion annually over the next five years.
James Murray, chief secretary to the Treasury, said the figures underscored the urgency of the government’s fiscal plan. “£1 in every £10 we spend goes on debt interest—money that could otherwise be invested in public services,” he said. “That is why last month the chancellor set out a budget that delivers on our pledge to cut debt and borrowing.”