UK Borrowing Overshoots Forecasts Ahead of Healey’s First Budget

UK government borrowing came in significantly above expectations in August, adding to pressure on Chancellor John Healey ahead of his first budget. Official figures showed public-sector net borrowing of £18.3 billion, higher than every forecast in Reuters’ economist poll and well above the £15.5 billion median estimate. The Office for National Statistics also revised borrowing upwards for each of the previous four months.

The cumulative position shows a larger problem than a single disappointing month. Britain borrowed £77.3 billion during the first five months of the 2026/27 financial year, £2.2 billion less than during the same period last year but £8.1 billion more than the Office for Budget Responsibility had forecast by this stage. The current-budget deficit reached £51.9 billion between April and August, compared with the OBR’s forecast of £47.1 billion.

Government revenues have been supported by strong tax receipts, but those gains have been offset by increased spending. The figures show higher expenditure on goods and services alongside the impact of inflation-linked welfare payments, leaving borrowing above the path anticipated by the government’s official fiscal watchdog.

The figures create a more difficult backdrop for Healey as he prepares his first budget. Higher-than-forecast borrowing reduces the room available for tax cuts or additional spending without some combination of further borrowing, higher taxation or spending restraint. The latest data do not mean that tax rises are inevitable or that the government has already breached its fiscal rules, but they narrow the Chancellor’s options.

The numbers now confronting the Treasury are stark: £18.3 billion borrowed in August, £8.1 billion above the OBR’s cumulative forecast after five months, with borrowing for each of the previous four months subsequently revised upwards.

Sources

• Reuters: UK borrowing overshoot darkens backdrop to Healey’s budget