22nd September 2026
Britain's public finances have produced another warning sign ahead of next month's Budget, with government borrowing rising sharply in August and running considerably ahead of the official forecast.
The Office for National Statistics says the public sector borrowed £18.3 billion in August 2026, £2.9 billion more than in August last year and the second-highest August figure on record, behind the exceptional figure recorded during the pandemic in 2020.
More importantly, borrowing during the first five months of the financial year has reached £77.3 billion.
That is actually £2.2 billion lower than during the same period last year, so the situation is not simply one of borrowing continually getting worse. But it is £8.1 billion higher than the Office for Budget Responsibility expected when it produced its March forecast.
That difference is likely to attract attention when the Chancellor prepares the Budget on 28 October.
Tax receipts are rising
One of the interesting features of the figures is that the Government is not collecting less tax.
Quite the opposite.
Central government received £89.8 billion in current income during August, £3.3 billion more than a year earlier.
Income-related taxes were up £1.5 billion, corporation tax rose by £400 million and VAT receipts increased by £300 million. National Insurance contributions were also higher.
Looking at the financial year so far gives an even clearer picture.
Total central government receipts between April and August were £460.7 billion, up £23.6 billion, or 5.4%, on the same period last year.
Corporation tax receipts were particularly strong, rising by 10.4%, while income-related taxes increased by 6.6%.
The problem is that spending is rising too.
Spending is growing faster
Central government expenditure reached £103.1 billion in August, £4.9 billion more than a year earlier.
Spending on goods and services increased by £2.2 billion, while net social benefit payments rose by £1.9 billion.
Debt interest also remains a substantial cost. The Government paid £8.8 billion in interest in August, the highest August figure since records began in 1997, although this was lower than the amounts recorded in each of the first three months of the financial year.
Inflation has an important part to play here. Many benefits are linked to inflation, while the cost of providing public services, including pay, is also affected by rising prices.
There was also a £2.1 billion increase in the value of index-linked government debt during August because of movements in the Retail Prices Index.
This illustrates one of the problems facing governments with a very large debt pile: changes in inflation can affect the cost of servicing that debt even when the Government is not making a new spending decision.
The debt is still close to £3 trillion
Public sector net debt stood at approximately £2.986 trillion at the end of August.
That is £78.5 billion higher than a year earlier.
However, because the economy has also grown, debt as a proportion of GDP was 93.8%, down from 95.1% a year earlier.
So there is a slightly unusual combination in the figures.
The Government owes more money in cash terms, but that debt is somewhat smaller relative to the size of the economy.
The ONS says the debt-to-GDP ratio is at a level last seen in the early 1960s.
Why the October Budget matters
The figures arrive just over a month before the Government's next Budget on 28 October.
The OBR's March forecast expected public sector borrowing to be lower than the ONS has so far recorded.
After five months, borrowing is £8.1 billion above that forecast.
It would be wrong to assume that the entire difference will remain by the end of the financial year. Monthly figures can be volatile and the ONS stresses that year-to-date figures provide a better guide to the underlying position.
There will also be further revisions as better information becomes available.
Nevertheless, the figures show the Government has less room for manoeuvre than the headline tax receipts might suggest.
Tax revenues are growing, but expenditure is growing too.
What does it mean for taxpayers?
The figures do not tell us what the Chancellor will do in October. They do, however, show the basic arithmetic facing the Government.
There is strong demand for public services, benefits and investment. The country also has a very large existing debt burden, meaning that billions of pounds have to be spent simply servicing previous borrowing.
At the same time, higher taxes have already increased government income substantially.
The central question is therefore becoming increasingly familiar: how much more revenue can be raised before higher taxation begins to affect households, businesses and economic growth, and how much spending can realistically be controlled without affecting public services?
That is a particularly important question for Scotland.
The Scottish Government does not control most of the major taxes or borrowing recorded in these figures, but its spending is heavily influenced by the overall UK fiscal position through the funding it receives from Westminster.
For councils, health services and other public bodies already facing difficult financial decisions, the condition of the UK public finances matters.
The August figures do not amount to a financial crisis.
They do show something rather more mundane but important: the Government is collecting considerably more money than it did a year ago, but it is still spending even more.
With the Budget only weeks away, that gap will be one of the numbers worth watching.
Read the full ONS report HERE