Additionally in a UK context, Public Sector Net Borrowing in August was £18 billion. That’s the highest that month’s total has ever been in five years! That’s an increase of £3.5 billion on the same month last year. New data published today by the ONS reveals borrowing bust analysts’ predictions. This has raised alarm bells about the health of our public coffers.
In the first five months of this financial year alone, total borrowing amounted to £83.8 billion. This is £16.2 billion more than the same period last year. This borrowing trend is a clear indication of the growing wave of public sector borrowing at a time of ever-growing demands on government coffers.
During August 2020, the UK witnessed a borrowing record. It reached a high of £24 billion largely due to the economic impacts of the COVID-19 pandemic. This blistering figure dropped to £13.9 billion in August 2021 and even lower at £7.8 billion in August 2022. Public finances registered a record high in August 2023 at £11.4 billion. Fast forward to now, August 2025, and that figure has increased to an alarming £18 billion.
The ONS attributed the rise in borrowing to increased public spending on services, benefits, and debt interest, which outstripped growth in tax and National Insurance receipts. Yes, these receipts have gone up, but they have not matched the rate of increase in spending.
“This highlights the deteriorating nature of the public finances even though the economy hasn’t been terribly weak,” – Paul Dales, chief UK economist at Capital Economics.
The policy implications of this increasing borrowing are profound. The Chancellor of the Exchequer is preparing for November’s Budget. He’ll need to set a tone with difficult choices on fiscal discipline and future tax increases. Revenue economic analysts have long urged that the State Government consider other new revenue sources. For Dales, that would largely just mean enforcing the taxes that have already been raised.
The new fiscal reality is demanding for lawmakers to navigate. Just as importantly, it affects the larger economy as it seeks to rebound from the pandemic. That increased borrowing would have to be paid for through higher interest rates or austerity if no action were taken.