Government borrowing overshoots forecasts as inflation adds to Budget pressure
Official figures show government borrowing was £18.3bn in August, £3.5bn above forecast, as inflation and debt costs add to pressure on Chancellor John Healey before the Budget.
The Full Story
A plain summary built from the channels that reported this story.
Government borrowing came in at £18.3 billion in August, £3.5 billion more than the independent forecaster expected, as higher inflation and debt interest costs added to pressure on Chancellor John Healey before the Budget.
Official figures from the Office for National Statistics showed net borrowing was £18.3 billion last month. That was £3.5 billion above the Office for Budget Responsibility's forecast and £2.9 billion, or 19%, higher than the same month last year. It was also the second highest August borrowing on record, behind 2020 during the coronavirus pandemic.
The overshoot is not confined to one month. Since the financial year began in April, the government has borrowed about £77 billion. That is roughly £8 billion more than forecast, although it is still slightly below the £79.5 billion borrowed in the same period last year. The OBR had expected borrowing of less than £69 billion for April to August.
Tax receipts have held up better than expected, with income tax and national insurance revenues healthy. The problem is spending. More money went out in welfare benefits and the state pension than forecasters expected. Debt interest costs are also high: the government spent almost £9 billion on debt interest in August alone. Higher inflation has made inflation-linked benefits, pensions and debt repayments more expensive. The Middle East conflict, including the US conflict with Iran, has pushed up energy prices and inflation. August inflation was the highest for five months, driven by petrol and diesel.
Borrowing costs for the government have risen as investors demand more to lend to the UK. National debt has risen to 93.8% of national income over the past 20 years, one of the largest increases among wealthy countries. One pound in every ten of government spending now goes on servicing debt, according to one discussion. Monthly figures can be volatile and are often revised, but economists say the trend adds to the pressure on Healey.
Healey is preparing his first Budget next month, with just five weeks to go in some reports. Economists say he may need to find about £15 billion just to keep the public finances where they are. The government has promised to stick to fiscal rules that bring down borrowing, while also offering more help with the cost of living, higher defence spending, social care reform and more council housing. That leaves difficult choices: raise taxes, restrain spending, scale back policy ambitions, or a combination. Analysts and politicians said tax rises look increasingly likely unless growth improves.
The figures also feed into a wider political argument about growth, debt and welfare. Some commentators warned that the UK is stuck in a cycle of higher taxes and borrowing, and that an ageing population could push debt much higher without action on welfare and growth. The Chancellor's allies and critics agree that the public finances are under strain, even if the government's finances are not collapsing.
On screen
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Key Claims
Claims reported during this story's coverage, mapped by channel. Ordered by how many channels carried each claim.
| Claim | BBC One | BBC Two | Channel 4 | ITV |
|---|---|---|---|---|
| Government borrowing was £18.3 billion last month, £3.5 billion higher than the independent forecaster predicted. | ||||
| Economists expect the Chancellor will need about £15 billion in the Budget to keep public finances unchanged, likely through tax rises. | · | · | · | |
| Inflation in August reached a five-month high, driven by petrol and diesel costs. | · | · | · | |
| One pound in every ten pounds of government spending is used to service debt. | · | · | · | |
| Tax revenues held up while spending on benefits and the state pension was higher than expected. | · | · | · | |
| The debt trajectory could rise from around 95% of GDP to 300% by 2060. | · | · | · | |
| The government spent almost £9 billion on debt interest costs in August alone. | · | · | · |
Channel Perspectives
What each channel focused on, with key quotes.
Channel 4 gave a short, straight summary of the borrowing and inflation figures, with no studio analysis. It stressed that inflation was at a five-month high because of petrol and diesel costs and framed the numbers as immediate pressure on the Chancellor before the Budget. It did not spell out the tax or spending choices in detail.
- “The UK borrowed £18.3 billion last month, higher than expected.”
- “Figures from the Office for National Statistics showed that net borrowing was £3.5 billion higher than the government's independent forecaster had predicted.”
- “Inflation in August was at its highest rate for five months, driven up by the rising cost of petrol and diesel.”
BBC ONE West devoted the most airtime to explaining the figures, using economics specialists to put the monthly jump in context. It played down one month's volatility but pointed to a clear overshoot across the financial year, with tax receipts holding up while welfare, investment and debt interest costs rose. It repeatedly framed the story around the Chancellor's limited room for manoeuvre and the likelihood of tax rises.
- “It's also the second highest August borrowing on record. That's behind that of 2020 during the coronavirus pandemic.”
- “economists say it doesn't really change the picture. We're still looking at one where the Chancellor is likely to have to find £15 billion in the budget just to keep the public finances where they are, and that is likely to mean, I'm afraid to say, tax rises.”
- “he'll have to decide whether to tax even more, whether to spend less or let borrowing take some of the strain.”
ITV1 treated the figures as a political and household finance problem. Joel Hills, reporting from the Treasury, said the government's finances were not collapsing but called August a shocker, stressing that spending on benefits and pensions and debt interest linked to war-driven inflation were the main problems. Coverage emphasised that tax rises now look inevitable and that the Chancellor is hemmed in with five weeks to go.
- “The government's finances are not collapsing, but August was a really quite dismal month.”
- “The government spent almost £9 billion in August alone on debt interest costs.”
- “Tax rises in the budget do seem inevitable.”
BBC TWO's Newsnight moved from the figures to a studio debate about the political choices before the Budget. It highlighted persistently higher inflation as the driver of August borrowing and focused on debt interest, tax rises, welfare and growth. The tone was more argumentative, with contributors warning about a cycle of higher taxes and borrowing and an ageing population.
- “an unexpected surge in government borrowing in August driven by persistently higher inflation has added to the pressure on the Chancellor John Healey as he prepares to deliver his first budget at the end of October”
- “I worry that we're spending one pound in every ten of government spending on servicing our debt”
- “unless we show that we have got and we've got a grip of the public Finances, you know that is absolutely critical”
Broadcast Timeline
News broadcasts tracked for this story, in time order.