UK government borrowing hits £18.3bn

The UK government borrowed £18.3bn in August, a figure that was higher than expected by both financial markets and the government's own independent forecaster. Official data from the Office for National Statistics, released on Tuesday, showed public sector net borrowing was £2.9bn higher than in August 2025.

This brought borrowing for the financial year so far to £77.3bn, which is £8.1bn above the forecast made by the Office for Budget Responsibility (OBR). The August figure also exceeded the £15.6bn forecast by City analysts.

Fiscal pressure ahead of budget

The data increases pressure on Chancellor John Healey as he prepares next month's budget. Healey has pledged to adhere to the government's existing spending limits, which cap borrowing as a proportion of national income. The August figures follow a larger-than-expected £1.8bn deficit in July.

Chris Beauchamp, chief market analyst at IG, commented on the situation. "The PM and chancellor will be feeling quite claustrophobic today as the walls close in around them," he said. "Borrowing costs keep climbing, while borrowing itself is outpacing the teeny rise in tax receipts."

Rising costs and market strains

The cost of servicing government debt remains a significant burden. The Institute for Fiscal Studies thinktank reported that since April, the government has spent £50bn on debt interest, which is £2bn more than the OBR forecast in March.

Nick Ridpath, an IFS research economist, noted the scale of the challenge. On those forecasts, made before the most recent hikes in government interest rates, debt interest was set to be more than £100bn every year over the next five years, he said.

Central government spending on social security benefits and pensions has also risen sharply, climbing by almost £10bn compared to the same period last year, from £135.3bn to £145bn. This increase is largely a response to rising inflation.

Bond markets and economic warnings

Financial markets reacted to the news, with yields on UK government bonds edging higher. On Tuesday, the yield on 10-year UK bonds rose three basis points to 5.232%, while 30-year bond yields also increased by 3 basis points to 5.729% in early trading.

The International Monetary Fund has urged Western governments to exert greater control over their public finances to reassure financial markets. Martin Beck, chief economist at WPI Strategy, described the public finance figures as another unwelcome setback for the government ahead of next month’s budget.

Emma Reynolds, the chief secretary to the Treasury, stated the government's commitment to fiscal discipline. At a time when debt interest costs billions of pounds that could otherwise be spent on improving lives, we must always know where the money is coming from to pay for public services, she said.

Political criticism and OBR caution

The opposition Conservative party was critical of the figures. Andrew Griffith, the Conservative Treasury spokesperson, accused the government of losing control. They are borrowing so much they’ve overshot the OBR forecast by an extra £8bn of debt, he said. It takes a rare fiscal incontinence to both have the highest tax take in history and see borrowing still shoot up.

The Office for Budget Responsibility has cautioned that its early-year estimates of government borrowing are provisional and likely to be revised. The Bank of England held interest rates steady at its latest meeting but warned borrowing costs may need to rise if inflationary pressures, with CPI at 3.1%, persist.