The UK government's borrowing has surpassed official projections for the current financial year, according to newly released statistics that highlight ongoing fiscal challenges for Chancellor of the Exchequer Rachel Reeves. The latest figures from the Office for National Statistics reveal a complex financial landscape as the government navigates economic pressures while attempting to stabilise public finances.
December Borrowing Figures and Annual Totals
During December, public sector borrowing stood at £11.6 billion, which came in below the £13.4 billion prediction made by City analysts. However, cumulative borrowing throughout the financial year has now climbed to £140.4 billion, exceeding the Office for Budget Responsibility's anticipated total of £138.3 billion for the current year.
Tom Davies, deputy director for the public sector division at the ONS, commented on the December figures, noting that "borrowing in December was substantially down on the same month in 2024, as a result of receipts being up strongly on last year whereas spending is only modestly higher."
Key Financial Metrics and Government Response
The statistics body also revealed several critical financial indicators:
- The current budget deficit—representing the gap between tax revenues and day-to-day spending—reached £5.8 billion last month and £94.9 billion across the financial year
- Public sector debt as a proportion of GDP was recorded at 95.5 per cent
- The government paid approximately £9.1 billion to creditors via debt interest payments
Treasury Chief Secretary James Murray emphasised the government's commitment to delivering value for taxpayers' money, stating: "Last year we doubled our headroom and we are forecast to cut borrowing more than any other G7 country with borrowing set to be the lowest this year since before the pandemic."
Murray added a pointed observation about debt interest payments: "It cannot be right that £1 in every £10 we spend goes on debt interest – which could be better spent on our nurses, police officers and teachers – that's why we're tackling it."
Upcoming Fiscal Changes and Policy Context
These spending statistics emerge ahead of several significant fiscal developments:
- Government proposals to boost welfare payments for thousands of households with more than three children
- Pension increases via the triple lock mechanism
- Impending business rates increases for hospitality, retail and other commercial sectors
Ministers are preparing temporary relief measures for pubs facing substantial tax burdens, with Chancellor Reeves acknowledging that "the situation the pubs face is different from other parts of the hospitality sector." The majority of proposed taxation and expenditure changes will take effect in April, coinciding with the start of the new tax year.
Fiscal Framework and Expert Scrutiny
Throughout the week, Chancellor Reeves has promoted the UK as a stable haven for investors, with her commitment to maintaining fiscal rules forming a cornerstone of her economic strategy. However, this approach has faced scrutiny from fiscal experts.
Richard Hughes, the former chair of the OBR, has questioned the rules' dependence on fluctuating forecasts between fiscal announcements. He suggested that the UK has struggled to develop fiscal resilience against economic shocks, including bond market volatility, noting that Reeves oversees a budget deficit of approximately five per cent of GDP.
Hughes informed the Lords Economic Affairs Committee recently: "Fiscal rules that we now have in place are amongst the loosest that the UK has had in its history. The rules we have at the moment are providing the government the capacity to run a quite significant structural deficit."
The combination of exceeding borrowing forecasts, substantial debt interest payments, and upcoming fiscal changes creates a challenging environment for economic management as the government balances immediate pressures with long-term financial stability.
