UK borrowing surpasses forecast by £20 billion challenging fiscal targets

Government borrowing has exceeded official expectations by over £20 billion in the year to February, placing significant pressure on Chancellor Rachel Reeves ahead of the upcoming spring statement. February’s borrowing alone reached £10.7 billion, marking the fourth-highest figure for the month since 1993. These levels came in higher than analysts predicted, according to the Office for National Statistics (ONS).

The total public borrowing for the fiscal year now stands at £132.2 billion, exceeding the £111.8 billion forecast made by the Office for Budget Responsibility (OBR) in October. This figure is also £14.7 billion higher compared to the same period last year. As sluggish economic growth and rising borrowing costs erode Reeves’s £9.9 billion margin of error for fiscal balance, the chancellor is expected to announce spending reductions during the spring statement next week.

To mitigate the fiscal strain, the government has already implemented spending cuts, including scaling back benefits for young and disabled individuals, a move projected to save £5 billion. Darren Jones, Chief Secretary to the Treasury, stated that the government’s focus is now firmly on scrutinising every aspect of public spending to ensure efficiency and alignment with long-term goals. He described this level of financial evaluation as unprecedented in 17 years.

Economic forecasts from the OBR suggest challenges ahead as the UK faces international pressures, including uncertainty stemming from President Trump’s tariff policies, which the Bank of England has noted could further destabilise global markets. Meanwhile, the UK economy continues to contend with rising public debt. Public sector net financial liabilities climbed to 82.9 per cent of GDP in February, while net debt under older measures stood at 95.5 per cent of GDP.

Tax revenues have increased by £34.3 billion compared to last year, totalling £941 billion. However, public spending has grown even faster, rising by £41.7 billion to exceed £1 trillion, deepening the financial shortfall. Analysts at the Resolution Foundation described the state of public finances as precarious, calling for some level of fiscal tightening to keep government targets on course.

As anticipation builds for the spring statement, many are watching closely to see whether Reeves will delay significant tax and spending reforms until the autumn budget. However, with borrowing costs continuing to rise and economic pressures mounting, such decisions may no longer be feasible. The ONS confirmed that £7.4 billion was spent servicing public debt in February alone, an amount unchanged from the prior year, yet a continuing strain on public resources.