CHANCELLOR Rachel Reeves has been dealt a further setback after official figures showed the highest August borrowing for five years, with warnings mounting that tax rises at the autumn Budget now look “inevitable”.
Latest figures from the Office for National Statistics (ONS) showed far higher-than-expected borrowing last month, at £18billion, which was £3.5 billion more than in August 2024.
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Soaring interest on Government debt – up £1.9billion to £8.4billion – added to higher spending on benefits and public services and offset any boost from the National Insurance Contributions (NICs) hike, according to the ONS.
It marked the highest August borrowing since 2020, significantly overshooting the £12.8 billion expected by most economists and was £5.5billion higher than forecast by the UK’s independent fiscal watchdog, the Office for Budget Responsibility (OBR), in March.
After a raft of upward revisions to the previous month’s data, borrowing for the first five months of the financial year hit £83.8billion.
This was £16.2billion higher than the same period a year ago and well ahead of the OBR’s £72.4billion prediction.
Martin Beck, chief economist at WPI Strategy, said: “The £10billion buffer the Chancellor pencilled in against her key fiscal rule in March has almost certainly gone.
“That means tax rises in November look inevitable.”
James Murray, Chief Secretary to the Treasury, insisted the Government “has a plan to bring down borrowing because taxpayer money should be spent on the country’s priorities, not on debt interest”.
He added: “Our focus is on economic stability, fiscal responsibility, ripping up needless red tape, tearing out waste from our public services, driving forward reforms and putting more money in working people’s pockets.”
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