UK government borrowing has climbed to its second-highest level on record for the first eight months of the financial year, underlining the scale of the challenge facing Rachel Reeves despite stronger tax receipts.
Figures from the Office for National Statistics (ONS) show that the government borrowed £132.3 billion between April and November, £10 billion more than over the same period last year. The only higher total for that stretch of the year was recorded in 2020, when emergency spending during the Covid-19 pandemic pushed borrowing to unprecedented levels.
Borrowing in November alone came in at £11.7 billion, £1.9 billion lower than a year earlier and the lowest figure for that month since 2021. However, earlier months were revised upwards by almost £4 billion, reinforcing the picture of sustained pressure on the public finances.
Tom Davies, senior statistician at the ONS, said that while November’s figure showed some improvement, the broader trend remained challenging. “Despite an increase in spending, this month’s borrowing was the lowest November for four years,” he said. “The main reason for the drop from last year was increased receipts from taxes and National Insurance contributions. However, across the financial year to date as a whole, borrowing is higher than last year.”
Markets reacted cautiously to the data, with the yield on the benchmark ten-year gilt edging up to 4.5 per cent and sterling slipping slightly against the dollar.
Tax revenues rose sharply over the period, climbing by £25 billion to £516 billion. This was driven by a £21 billion increase in National Insurance contributions and a £14 billion rise in income tax receipts. However, spending grew even faster, up £55 billion to £736 billion, largely due to a £15 billion increase in benefit payments.
Reeves has already introduced a £25 billion rise in employer National Insurance contributions, announced in her first budget last October and implemented in April, and extended a freeze on income tax thresholds in her second budget last month. The Office for Budget Responsibility (OBR) estimates those measures helped the chancellor rebuild fiscal headroom to around £22 billion, after £26 billion of additional tax rises — most of which take effect later in the forecast period.
Economists warned that the latest figures highlight the fragility of that position. Elliott Jordan-Doak, senior UK economist at Pantheon Macroeconomics, said the data illustrated “the shaky foundations” of relying on back-loaded tax rises to restore credibility. “The bigger picture is that the public finances remain weak,” he said.
Sandra Horsfield, economist at Investec, added that progress in reducing the deficit appeared “a little slower than hoped”, despite stronger revenues.
The ONS said the current budget deficit — which Reeves must turn into a surplus within five years to meet her fiscal rules — stood at £93 billion over the eight-month period, £7 billion higher than a year earlier. The OBR forecasts total borrowing of £138 billion for the full financial year.
Public sector net debt rose to 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, down from £9 billion in October, but remain forecast to exceed £100 billion a year over the next five years.
James Murray, chief secretary to the Treasury, said the figures underscored the urgency of the government’s approach. “£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.”
