UK government borrowing rises to £18.3bn in August

UK government borrowing rose sharply in August to £18.3 billion, the second-highest figure for the month on record, according to the Office for National Statistics. This total exceeded the Office for Budget Responsibility’s forecasts by approximately £3.5 billion and represents a nearly 20% increase compared to August 2025.

While tax receipts have increased—with central government receiving £89.8 billion in August—spending has outpaced income. Drivers for this deficit include inflation-related costs, increased spending on goods and services, and rising social benefit payments. Notably, debt interest payments reached £8.8 billion in August, the highest for the month on record, partly due to higher interest on inflation-linked government bonds.

These figures place significant pressure on Chancellor John Healey ahead of the October 28 Budget. The cumulative borrowing for the first five months of the financial year has reached £77.3 billion, which is £8.1 billion higher than the OBR had projected. Economists warn that the government’s fiscal headroom is shrinking, potentially limiting the ability to avoid tax increases or necessitating spending cuts to meet fiscal rules.