Steep tax increases during the autumn Budget appear unavoidable, according to financial experts, following a significant surge in government borrowing.
UK Government Borrowing Surges in August 2025
The Office for National Statistics (ONS) has reported a significant increase in the UK government's borrowing for August 2025, marking the highest August borrowing in five years. The borrowing for August 2025 was £18 billion, a £5.5 billion increase compared to the forecast by the Office for Budget Responsibility (OBR) in March 2025.
The ONS data shows public sector net debt at £2.91 trillion, equating to 96.4% of gross domestic product (GDP), an increase of 0.5 percentage points from last year and a level last seen in the early 1960s. Interest on Government debt in August 2025 was £1.9 billion higher than in the same month last year, totaling £8.4 billion.
The borrowing for the first five months of the financial year, up to August 2025, hit £83.8 billion, which is £16.2 billion higher than the same period a year ago. This overshoots the OBR's £72.4 billion prediction, indicating a widening financial deficit.
James Murray, Chief Secretary to the Treasury, asserted that the Government has a plan to bring down borrowing. According to Murray, the Government's focus is on economic stability, fiscal responsibility, reducing red tape, eliminating waste from public services, driving reforms, and increasing money in working people's pockets.
However, the Chancellor is under increasing pressure to consider tax hikes to address this financial deficit and potential breach of fiscal rules. Martin Beck, chief economist at WPI Strategy, stated that the £10 billion buffer the Chancellor pencilled in against her key fiscal rule in March has almost certainly gone. Elliott Jordan-Doak, senior UK economist at Pantheon Macroeconomics, suggests the Chancellor may need to raise taxes by more than £20 billion to address the current financial situation.
Shadow chancellor Mel Stride claims the Chancellor has lost control of the public finances, attributing this to the party's inability to implement welfare reforms to cut spending. Stride warns of more tax rises in the autumn due to Labour's alleged lack of control over borrowing.
It is important to note that the ONS data does not provide new information about the borrowing for the first five months of the financial year compared to earlier reported facts. Additionally, the data does not provide new information about the borrowing compared to the expectations and forecasts of economists and the Office for Budget Responsibility (OBR).
The higher-than-expected borrowing in August 2025 significantly overshot the expected £12.8 billion by most economists. This overshoot can be partly attributed to the ONS revising borrowing estimates for recent months up by almost £6 billion due to lower VAT receipts than initially thought. Debt interest in August 2025 was increased by £2.6 billion due to changes in the Retail Prices Index on inflation-linked debt.
The person who described Chancellor Rachel Reeves as facing a further setback due to the high August budget deficits reported by the Office for National Statistics is not explicitly named in the provided search results. However, the high borrowing figures are likely to intensify the pressure on the Chancellor to take action to address the financial deficit and potential breach of fiscal rules.
