Public sector borrowing has surged previous official expectations by greater than £20 billion to this point this monetary yr, piling stress on Chancellor Rachel Reeves forward of subsequent week’s Spring Assertion.
Figures from the Workplace for Nationwide Statistics (ONS) present that in February alone, the federal government borrowed £10.7 billion—making it the fourth-highest complete for that month since information started in 1993 and better than economists had predicted.
This brings complete public borrowing between April 2024 and February 2025 to £132.2 billion—£20.4 billion above the £111.8 billion forecast by the Workplace for Price range Duty (OBR) on the time of the October Price range.
The info has raised doubts about whether or not the chancellor can meet her fiscal guidelines—most notably the requirement to make sure day-to-day spending is roofed by tax revenues inside 5 years and to cut back debt as a share of GDP within the ultimate yr of the OBR’s forecast.
Economists now consider Reeves’ already slender £9.9 billion margin for manoeuvre could have eroded considerably resulting from sluggish financial progress and rising borrowing prices.
Dennis Tatarkov, senior economist at KPMG UK, stated: “There may not be much room for the chancellor to defer major tax and spending decisions to the autumn budget.”
Alison Ring, director of public sector and taxation on the ICAEW, echoed that view, suggesting the February figures might “force [Reeves’] hand” forward of the deliberate spending evaluate in June.
The ONS reported that debt servicing in February remained excessive at £7.4 billion—unchanged from the identical month final yr. Public sector web debt now stands at 95.5% of GDP utilizing the normal measure, whereas the newer most well-liked measure—web monetary liabilities—places it at 82.9%, up 2.3 share factors year-on-year.
Whereas tax revenues climbed £34.3 billion to £941 billion within the yr thus far, public spending rose even quicker, up £41.7 billion to over £1 trillion.
With subsequent week’s Spring Assertion anticipated to incorporate new public spending cuts, the federal government has already begun scaling again advantages for younger and disabled individuals, citing a £5 billion saving.
Darren Jones, Chief Secretary to the Treasury, stated: “We must go further and faster to create an agile and productive state… going through every penny of taxpayer money line by line.”
In the meantime, the financial image is clouded by geopolitical tensions and market volatility. The Financial institution of England has stored rates of interest on maintain at 4.5% and signalled a cautious path to easing. It has additionally warned that world uncertainty, fuelled partly by President Trump’s shifting tariff coverage, might additional constrain progress.
The OBR is broadly anticipated to revise down its 2025 GDP forecast from the two% progress projected in October.
Markets responded with warning: sterling slipped 0.22% in opposition to the greenback to $1.29, whereas the FTSE 100 dipped 0.44% to shut at 8,663.59.
