Government borrowing has exceeded the official forecast by £8.1 billion during the first five months of the financial year, adding to pressure on Chancellor John Healey ahead of next month's Budget.
Figures released by the Office for National Statistics show that public-sector net borrowing reached £18.3 billion in August.
The monthly deficit was £3.5 billion higher than the £14.8 billion forecast by the Office for Budget Responsibility and exceeded every estimate submitted to a Reuters poll of economists.
Total borrowing between April and August has now reached £77.3 billion, compared with the £69.2 billion expected by the OBR at this stage of the year.
Borrowing lower than last year but above forecast
The figures contain an important qualification: cumulative borrowing is £2.2 billion lower than during the same five-month period of 2025/26.
The immediate problem for the Government is therefore not that borrowing has increased against every comparison. It is that the deficit is falling more slowly than anticipated in the official forecast underpinning the Chancellor's tax and spending plans.
August itself was weaker than a year earlier, with borrowing £2.9 billion higher than in August 2025.
Early public-finance estimates are routinely revised as more complete tax, spending and local-government information becomes available. The £8.1 billion overshoot should consequently be treated as the latest official estimate rather than a final figure for the year.
Day-to-day deficit also exceeds OBR path
The current-budget deficit, which measures the gap between day-to-day government spending and receipts while excluding net investment, reached £51.9 billion between April and August.
That was £4.8 billion above the OBR's forecast of £47.1 billion for the same period.
The distinction matters because the Government's fiscal rules require the current budget to move into balance by 2029/30.
A persistent overshoot could reduce the room available to the Chancellor when setting taxes and departmental budgets, particularly if the OBR concludes that the deterioration will continue in later years.
Higher spending offsets stronger tax receipts
The ONS said tax receipts had remained strong but were outweighed by increases in government expenditure.
Spending pressures included the cost of public services and inflation-linked welfare benefits. Central-government expenditure increased more quickly than receipts during August, widening the monthly shortfall.
The figures do not mean that the Government has already spent £77.3 billion more than planned for the entire year. They measure borrowing over the first five months against the amount forecast for that same period.
Debt-interest bill reaches £8.8bn
Interest payable on central-government debt reached £8.8 billion in August, the highest figure recorded for that month since monthly records began in 1997.
A significant portion of Britain's government debt is linked to inflation, meaning increases in the Retail Prices Index can feed through into higher interest costs.
Debt interest is particularly difficult for the Treasury because it consumes revenue without directly funding public services or new infrastructure.
Higher market borrowing costs can also reduce fiscal flexibility by raising the price at which the Government issues and refinances debt.
Pressure builds before October Budget
Healey is due to deliver the Budget on 28 October, the first full fiscal event reflecting the priorities of Prime Minister Andy Burnham's Government.
The Chancellor must balance demands for public spending and cost-of-living support against the commitment to remain within the Government's fiscal rules.
The OBR will produce a new economic and fiscal forecast alongside the Budget. That assessment, rather than the monthly figures alone, will determine whether the Government's projected headroom has materially changed.
If the watchdog judges that borrowing and debt-interest costs will remain higher over the medium term, Healey could face pressure to raise taxes, reduce planned spending or revise other policies.
Debt remains close to annual economic output
Public-sector net debt excluding public-sector banks was estimated at approximately 93.8 per cent of gross domestic product at the end of August.
That proportion was lower than a year earlier but remains high by historical standards, leaving the public finances sensitive to economic growth, inflation and changes in interest rates.
The latest data therefore present a mixed picture: borrowing is below last year's cumulative total, but the improvement is substantially weaker than the OBR expected.
Figures strengthen focus on fiscal choices
One month's borrowing figure does not decide the Budget, and the latest estimates may be revised. However, the £8.1 billion year-to-date gap provides the clearest official indication yet that the Chancellor is entering the October statement with less room than forecast in March.
The central political question will be how Healey responds if the OBR confirms that the pressure is structural rather than temporary.
Sources
- Office for National Statistics: Public sector finances, UK — August 2026
- Office for National Statistics: August 2026 public-sector finances release — 22 September 2026
- Reuters: UK borrowing overshoot darkens backdrop for Healey's Budget — 22 September 2026
- Office for Budget Responsibility: Official economic and fiscal forecasts