Official figures show UK Government borrowing reached its second-highest level on record for August, exceeding official predictions and increasing strain on Chancellor John Healey ahead of delivering his first autumn Budget statement.
Public sector net borrowing climbed to £18.3 billion during August, which surpassed expectations from official Government forecasters by £3.5 billion, according to figures from the Office for National Statistics (ONS).
The total was £2.9 billion, or 19%, higher than during the corresponding month last year, marking the second-largest August borrowing total recorded, behind only 2020.
The ONS stated that the surge was primarily driven by state expenditure outstripping revenues gathered through taxation and various other receipts.
This was driven in part by inflation-linked cost pressures as well as government spending on the state pension and additional benefits.
Furthermore, central Government payments on debt interest reached £8.8 billion in August, which represents the highest figure ever recorded for the month since official records began.
The increase was partially sparked by elevated inflation raising interest payable on Retail Prices Index (RPI)-linked Government bonds, known as gilts, creating greater volatility in costs.
Escalating debt interest payments pose significant hurdles for Mr Healey, whose fiscal headroom remains severely squeezed with just a single month remaining before he delivers his inaugural autumn Budget statement in October.
Emma Reynolds, the Chief Secretary to the Treasury, said: "Britain has huge potential to deliver good growth in every postcode, creating jobs, raising living standards and investing in the services people rely on.
"But we can only deliver that growth with fiscal discipline.
"At a time when debt interest costs billions of pounds that could otherwise be spent on improving lives, we must always know where the money is coming from to pay for public services.
"That is why we are committed to meeting our fiscal rules with a buffer against uncertainty, taking the tough decisions needed to keep the public finances on a sustainable path."
The Budget will take place on Wednesday 28 October, and will be Mr Healey’s first since he was appointed Chancellor by Andy Burnham back in July.
