August Borrowing Surges, Reeves Faces Tax or Spending Choices

Chancellor Rachel Reeves is facing mounting pressure to raise taxes or cut spending after official figures showed public borrowing hit its highest August level in five years and productivity downgrades threatened to widen a large fiscal shortfall ahead of the autumn Budget on November 26. The Office for National Statistics said borrowing in August was 18 billion, far above economists expectations, leaving year to date borrowing at 83.8 billion and public sector net debt at about 2.91 trillion, or 96.4 percent of gross domestic product.

The ONS attributed the rise to higher debt interest payments, up 1.9 billion to 8.4 billion, and increased spending on benefits and public services, which more than offset stronger tax and National Insurance receipts. Routine annual data revisions, including lower than first estimated VAT receipts and an upward adjustment to inflation linked debt costs, added almost 6 billion to recent borrowing estimates, the statistics office said. Grant Fitzner, chief economist at the ONS, said last month was the highest August borrowing total since the pandemic and that tax rises had been outstripped by spending pressures.

Analysts and think tanks say the...