Britain’s public borrowing climbed to £18.3 billion in August, marking the highest level for the month outside the pandemic period.
The figure was nearly 20% higher than a year earlier and highlighted the growing pressure on the UK government’s finances ahead of next month’s Budget.
UK Borrowing Exceeds OBR Forecast
August borrowing came in £3.5 billion above the Office for Budget Responsibility’s forecast.
Higher government spending more than offset stronger tax revenues during the month.
Central government spending was £2.3 billion above the OBR’s projection. Meanwhile, government receipts came in £0.2 billion higher than expected.
For the financial year to August, total public borrowing reached £77.3 billion.
That was £2.2 billion lower than during the same period last year. However, borrowing remained £8.1 billion above the OBR’s March forecast.
Debt Interest Costs Reach Record August High
Government debt interest payments rose to £8.8 billion in August.
This was the highest August figure since records began in 1997.
Around £2.1 billion of the total came from higher payments on index-linked government bonds. These payments increased after the Retail Prices Index rose 0.3% between May and June.
Higher debt-servicing costs remain an important challenge for the UK’s public finances, particularly when inflation increases payments linked to index-linked gilts.
Welfare and Government Spending Increase
Net social benefit payments rose 6.9% from a year earlier to £29.2 billion.
At the same time, central government spending on goods and services increased 5.7% to £39.8 billion.
The rise in spending added to pressure on the government’s overall fiscal position, despite improved tax revenues.
UK Tax Receipts Continue to Rise
Income-related tax receipts increased by £1.5 billion, or 6.6%, to £24.6 billion.
Self-assessed income tax receipts for July and August were provisionally estimated at £18.6 billion.
That represented an increase of £1.9 billion compared with the same period last year.
However, the figure was still £0.4 billion below the OBR’s forecast.
UK Public Debt Reaches Nearly £3 Trillion
Public sector net debt stood at £2,985.5 billion at the end of August.
That was £78.5 billion higher than one year earlier.
However, debt as a share of the economy fell to 93.8% of GDP, compared with 95.1% a year earlier.
The ratio was at its lowest level since the early 1960s.
Fiscal Target Remains in Focus
Public sector net financial liabilities, the measure used for the government’s fiscal target, rose to £2,620.4 billion.
That was equivalent to 82.3% of GDP, up slightly from 82.1% a year earlier.
The government has committed to reducing this measure as a share of GDP by the financial year ending in March 2030.
The latest borrowing figures therefore underline the fiscal challenges facing the government as it prepares for the upcoming Budget.
