UK government borrowing skyrockets ahead of spring statement
- Public sector net borrowing reached £10.7 billion in February 2025, exceeding forecasts by £4.2 billion.
- This significant increase in borrowing adds pressure on Chancellor Rachel Reeves to address the looming deficit in her spring statement.
- The heightened borrowing levels raise concerns over potential austerity measures and tax increases needed to stabilize public finances.
In February 2025, the UK faced a significant increase in government borrowing, reaching £132.2 billion, which was £20.4 billion higher than forecasts made by the Office for Budget Responsibility (OBR). This increase in borrowing placed considerable pressure on Chancellor Rachel Reeves, who is preparing to announce fiscal measures that are aimed at addressing the growing deficit. The public sector net borrowing for February alone was reported at £10.7 billion, making it the fourth-highest February figure since records began in 1993. As the government navigates tighter fiscal constraints, the situation has been exacerbated by higher spending, which totaled £93 billion for the month, compared to the previous year’s spending. Tax receipts also fell short of expectations, coming in at £87.7 billion, contributing to the widening gap between income and expenditure. Economists have expressed concerns about the sustainability of these figures, foreseeing potential tax rises and spending cuts to stabilize the economy. Rachel Reeves faces a complex landscape where she has committed to specific fiscal rules, including not borrowing to fund day-to-day public spending. Analysts are warning that the current borrowing levels jeopardize these commitments, leaving the Chancellor in a difficult position ahead of her spring statement. There is widespread anticipation that her upcoming announcement will include cuts to public spending and potentially revise tax policies to cope with the financial pressures. The heightened borrowing and spending dynamics suggest a looming risk of austerity measures, a sentiment echoed by various economic analysts and institutions. The Resolution Foundation, a respected think tank, has called the current public finances "perilous", indicating that without a shift in the economic trajectory, increased taxation may be inevitable. As the government approaches its spring statement, the implications of these financial trends will unfold, determining the direction of policy under Chancellor Rachel Reeves’ leadership.