UK Borrowing Misses Forecast by £8.1bn Ahead of Budget

UK public borrowing reached £77.3 billion in the five months to August, £8.1 billion above the Office for Budget Responsibility’s forecast. RSM UK chief economist Thomas Pugh said the figures make tax increases in Chancellor John Healey’s October 28 Budget “virtually inevitable.”

The shortfall is against the OBR forecast, not last year’s borrowing. The £77.3 billion total was actually £2.2 billion lower than in the same period of 2025.

August alone brought £18.3 billion in borrowing, £3.5 billion more than the OBR expected and £2.9 billion above August 2025. Central government spending was £2.3 billion above forecast, while receipts were slightly higher than expected.

Across the financial year so far, central government took in £460.7 billion, up £23.6 billion from a year earlier. But its total spending reached £546.3 billion, a rise of £25.6 billion, leaving receipts unable to keep pace.

Benefits and pensions accounted for much of the spending increase. Payments in that category rose £9.7 billion year on year, while central government debt interest came to £50 billion, £2 billion above the OBR’s projection.

That overshoot narrows the room for the government to meet its fiscal rules without raising taxes, cutting spending or borrowing more. Higher borrowing also comes as the Treasury faces pressure to fund additional priorities, including defence.

The ONS figures do not make tax increases certain. But Pugh said the August jump points to a tougher Budget than Healey’s government had anticipated, while Treasury Chief Secretary Emma Reynolds warned of “tough decisions.”

The OBR’s next forecast is due alongside the Budget on October 28. It will show whether the borrowing gap persists and how much fiscal room the government has left.