UK Public Borrowing Exceeds Forecasts, Presenting Challenge for Finance Minister Rachel Reeves

British public borrowing in the first six months of the tax year exceeded official forecasts, posing a challenge for Finance Minister Rachel Reeves ahead of her first budget next week. Borrowing totaled £79.6 billion ($103.5 billion) from April to September, nearly £7 billion higher than projections made by the Office for Budget Responsibility (OBR).

In September alone, borrowing reached £16.6 billion, falling below economists’ forecasts but surpassing the OBR’s estimate of £15.1 billion. This marked the third-highest September borrowing figure since records began in 1993, driven largely by higher-than-expected public spending.

Reeves aims to boost public spending for infrastructure and services while raising taxes, but she has ruled out increasing major tax rates. Instead, taxes on wealthier individuals—such as capital gains, dividend, and inheritance taxes—are expected to rise, alongside employers’ contributions to social security.

While Reeves blames the previous Conservative government for a £22 billion fiscal shortfall, the Conservatives deny the claim, accusing her of setting the stage for tax increases. Deputy finance minister Darren Jones continued to criticize the previous administration for the current state of public finances.

Investors expect Reeves to adjust the government’s fiscal rules to allow more borrowing for investment, but after the bond market crisis of 2022 under Liz Truss, she is likely to proceed cautiously. Public debt stood at 98.5% of GDP in September, down slightly from earlier estimates.