Public sector borrowing reached £11.7bn last month, exceeding economist forecasts
Government borrowing in the UK outstripped forecasts in November, though it still declined compared to the previous year as tax revenues climbed in the wake of Rachel Reeves’ first Autumn Budget, reports BritPanorama.
Fresh data from the Office for National Statistics (ONS) revealed public sector borrowing hit £11.7bn last month. Analysts in the Square Mile had expected government borrowing would settle at £10.2bn during the period.
Despite exceeding expectations, this figure represented the smallest November borrowing total in four years and a £1.9bn reduction from the corresponding month in 2023.
Grant Fitzner, chief economist at the ONS, attributed the decline primarily to elevated tax revenues, particularly from a spike in national insurance receipts following Rachel Reeves’ increase to employer contributions announced in the 2024 Budget.
Looking at the broader financial year picture, borrowing in 2025 has climbed above last year’s levels. Provisional estimates place borrowing for the financial year through November 2025 at 4.4 per cent of gross domestic product (GDP) – a 0.1 percentage point rise compared to the equivalent eight-month stretch in 2024.
Richard Carter, head of fixed interest research at Quilter Cheviot, remarked that the latest borrowing figures highlighted a scarcity of good news for the UK economy. “Since Labour came to power, the government has been on a borrowing binge as they look to plug the gaps in the public finances,” he stated.
He noted that while the statistics showed a decline on the previous year, they still represented “a hefty level of borrowing and indicate quite how much spending this Labour government is doing in the first few years”.
In October, ONS data indicated public sector borrowing had surged to £17.4bn in a significant pre-Budget setback, with City analysts predicting government borrowing would settle at £15.2bn for that month. Aggregate borrowing in the current financial year has now breached £100bn, reaching £116.8bn—notably, almost £10bn above OBR projections.
November witnessed turbulent borrowing expenses following a series of leaks leading up to Rachel Reeves’ Autumn Budget, causing market fluctuations. Carter expressed doubts about the UK’s growth prospects, implying that a recession could be imminent if GDP figures continue to decline, with little sign of positive momentum.
“Until markets can be convinced that sustained growth is possible, or that a better fiscal equilibrium can be found between tax and spending, the UK will continue to have a premium slapped on its borrowing rates compared to peers,” he asserted.
Speculation earlier in November suggested the Chancellor might increase income tax by 2p while reducing national insurance by the same amount, a move that would breach Labour’s commitment not to raise taxes on ‘working people.’ Senior government figures hinted at this policy during media appearances, as the Treasury faced what was anticipated to be a £30 billion funding gap.
However, a briefing to the Financial Times on 14 November revealed that Reeves abandoned proposals for an income tax rise, surprising financial markets as bond traders grew concerned about the Chancellor’s ability to achieve fiscal balance. The yield on 10-year UK gilts surged by 13 basis points at the market open to 4.57 per cent—the sharpest increase since the Chancellor seemed visibly emotional in the House of Commons.
The government later clarified that the policy reversal was due to “better than expected” projections from the OBR. This explanation faced criticism, with Reeves accused of misleading the public, as the Chancellor had prior access to forecasts before suggesting the income tax increase.
In her Budget, Reeves maintained the income tax threshold freeze—a decision many interpreted as violating Labour’s manifesto pledge not to increase income tax.
The current figures underscore the balancing act the government faces in addressing rising borrowing costs while attempting to meet fiscal targets amidst uncertain economic growth. As discussions continue, the impact of policy shifts on market confidence will be closely monitored.
