Stories

Tue, 22 Sep 2026

Tue, 22 Sep 2026 Unexpected UK borrowing surge adds to pre-Budget pressure on chancellor

Borrowing was higher than expected in August as inflation piles pressure on the government ahead of the Budget.

* Government borrowing surged by £18.3bn in August, nearly a fifth higher than the previous year
* This was more than £3.5bn above official forecasters' expectations and added to pressure on Chancellor John Healey as he prepares for his first Budget at the end of October
* Higher inflation, driven up by petrol and diesel prices, led to increased spending on public services and benefits, outweighing higher tax receipts
* The interest paid on government debt rose to £8.8bn, its highest August level since records began in 1997
* Economists warn that the cost of servicing this debt will continue to rise in the coming months, making it harder for the Chancellor to meet his spending rules
* The Institute for Fiscal Studies (IFS) warns that the government's borrowing costs are a "worryingly large share" of overall spending and have been pushed up since the last official forecasts
* The UK economy is facing a "dismal backdrop" as inflation remains above target, pushing up borrowing costs and making life harder for the Chancellor to bring down borrowing and spend on priorities
* Experts warn that the government may have to find £15bn through tax rises to meet its spending rules