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Britain’s public sector borrowing reached an alarming £17.8 billion in December, marking a significant £10.1 billion increase compared to the previous year and registering as the third-highest December borrowing on record. These figures from the Office for National Statistics have intensified pressure on Chancellor Rachel Reeves as she grapples with restoring fiscal confidence.
The cumulative borrowing for the first nine months of the fiscal year stood at £129.9 billion, surpassing the previous year’s figure by £8.9 billion. This represents the second-highest borrowing level for the April-to-December period since monthly records began in 1993, painting a concerning picture for the UK’s fiscal health.
The December surge was primarily driven by escalating interest payments on inflation-linked bonds and a one-off payment for military accommodation repurchase. The figures substantially exceeded both economists’ expectations of £14.1 billion and the Office for Budget Responsibility’s October forecast of £14.6 billion.
Interest costs reached £8.3 billion in December, marking a £3.8 billion increase from the previous year. The public sector debt ratio remains at 97.2 per cent of GDP, matching levels not witnessed since the early 1960s. While tax receipts showed some improvement, rising by £4 billion to £65.5 billion, the overall fiscal situation remains challenging.
Market analysts suggest the chancellor may need to implement spending reductions or consider tax increases at the next Budget to maintain fiscal stability. The situation has placed Reeves in a particularly difficult position, as she attempts to balance economic growth initiatives with maintaining fiscal responsibility.
The Treasury’s chief secretary, Darren Jones, emphasised the government’s commitment to fiscal discipline, stating that economic stability remains paramount for delivering growth. However, opposition figures have criticised the government’s handling of public finances, calling for more decisive action to address the growing fiscal challenges.
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