Government borrowing higher than expected in February
UK government borrowing was higher than expected in February, adding pressure to Chancellor Rachel Reeves ahead of her Spring Statement next week.
Borrowing – the difference between spending and income from taxes – was £10.7bn last month, according to official figures.
The government’s independent forecaster had predicted that borrowing would be £6.5bn for the month.
Economists have suggested Reeves will announce spending cuts next week to meet her self-imposed rules for the economy, which the Treasury reiterated were “non-negotiable”.
“We must go further and faster to create an agile and productive state that works for people,” said Darren Jones, chief secretary to the Treasury, adding that the government “will never play fast and loose with the public finances”.
However, economists have warned the higher-than-expected borrowing last month “puts more pressure” on the Chancellor ahead of the Spring Statement on Wednesday.
Dennis Tatarkov, senior economist at KPMG, said the latest borrowing figures raise the risk of Reeves missing her self-imposed borrowing rules.
Most governments in wealthy nations have such rules, which are designed to reassure investors and maintain credibility with financial markets.
Reeves’s two main rules are: not to borrow to fund day-to-day public spending; and to get debt falling as a share of the UK economic output by 2029/30.
Although February’s borrowing figures will not have an impact on next week’s Spring Statement, they highlight the Chancellor’s “tight fiscal backdrop”, said Alex Kerr, UK economist at Capital Economics.
At the Budget in October, the government’s official forecaster the Office for Budget Responsibility (OBR) indicated Reeves had £9.9bn available to spend against her borrowing rules.
But next week the OBR will likely conclude the chancellor’s buffer has been “wiped out”, Mr Kerr said.
“We expect her to announce further non-defence spending cuts, on top of the welfare cuts already unveiled,” he added.
