Budget challenge for Reeves gets even bigger as borrowing surges

Britain's borrowing has shot past the official forecasts that underpin the government's tax and spending plans, compounding the already big challenge facing finance minister Rachel Reeves in her November budget.

- 

Public sector borrowing totalled 83.8 billion pounds ($113.39 billion) between April and August, 11.4 billion pounds more than projected by Britain's fiscal watchdog, official data published on Friday showed.

The borrowing was the highest for the first five months of a financial year since 2020 when the coronavirus pandemic forced the government into huge spending to prop up the economy.

Even before Friday's figures, Reeves had been expected to announce new tax increases in her November 26 budget to stay on track to meet her fiscal rules and avoid fresh upheaval in financial markets.

Higher taxes are likely to slow Britain's already stumbling economic growth, which Reeves and Prime Minister Keir Starmer have promised they will speed up.

Nabil Taleb, a PwC UK economist, said the government faced a combination of higher debt costs, hot inflation, opposition to spending cuts and the risk of an OBR downgrade to its growth forecasts, which would make Reeves' rules harder to meet.

“The chancellor faces tough choices, and the test will be whether she can make them palatable to voters and markets,” Taleb said.