In August, the United Kingdom recorded its largest level of government borrowing in five years. It shot up to £18 billion. The figure cited by the Office for National Statistics (ONS) is a staggering jump from previous years. This steep increase is cause for deep concern over the long-term fiscal integrity of our nation.
In the first five months of this financial year, the government borrowed a total of £83.8 billion. This figure is £16.2 billion more than it was for the same period last year. This trend is an alarming signal that, even with a strong and stable economy, the government’s financial condition is worsening. In the month of August, borrowing increased by £3.5 billion against August 2024. This increase was more than twice analysts’ expectations and points to an ominous trend for government coffers.
In general, August borrowing figures have demonstrated variability in recent years. In 2020, net borrowing hit a record £24 billion. It then fell to £13.9 billion in 2021 and then further fell again to £7.8 billion in 2022. In 2023, it increased again to £11.4 billion, a clear sign of a moving back up to higher levels. By August 2024, that amount had increased to £14.4 billion, rising to £18 billion by August 2025.
Student loan debt, especially borrowing for graduate study, is skyrocketing. This is possible despite tax and National Insurance receipts continuing to rise, unable to keep pace with increased spending on public services, benefits and debt interest. The government is under increasing pressure to redress this imbalance as it looks ahead to the next Autumn Budget in November.
Paul Dales, chief UK economist at Capital Economics, commented on the situation, stating, “This highlights the deteriorating nature of the public finances even though the economy hasn’t been terribly weak.”
As the Chancellor considers ways to manage these financial challenges, it is anticipated that measures will likely include raising taxes. Dales stressed that any solutions would be “largely accomplished” through increased taxes, highlighting the painful decisions in store for leaders.