Cliff Notes
- Government borrowing surged to £132.2bn last month, significantly exceeding forecasts and representing a £15bn increase from the previous year.
- The deficit reached £10.7bn in February, attributed to higher spending and lower tax receipts, marking the fourth highest monthly gap since 1993.
- Analysts predict impending spending cuts and tax rises in the forthcoming spring statement and October budget as public finances are described as “perilous”.
UK government borrowing and spending defies expectations, adding to tax rise or spending cut pressure
Government spending and borrowing have defied expectations resulting in “perilous” public finances and placing pressure on the Chancellor to raise taxes or cut spending.
Government borrowing last month was £15bn more than last year, with the deficit higher than economists predicted, according to official figures.
The gap between what the government takes in and what it spends was £10.7bn in February, the Office for National Statistics said, as spending was higher and tax takes were lower than forecasts.
The sum is the fourth highest since records began in 1993 and £4.1bn higher than anticipated by economists polled by the Reuters news agency.
Tax takes have been below the estimates provided by independent forecasters the Office for Budget Responsibility (OBR).
Tax receipts are now £11.4bn below the OBR forecast 11 months into the financial year while borrowing is £20.4bn higher.
This time last year, the government borrowed £117.5bn but the figure has soared to £132.2bn, representing a £15bn increase, the ONS data showed.
Bad news for government
It’s unwelcome news just days before Chancellor Rachel Reeves gives an update on the health of the British Economy in her spring statement.
The surplus reported last month was revised down by £2.1bn, worsening the picture.
Public finances have been described as being in a “perilous” state by respected thinktank the Resolution Foundation.
Other economic observers have said the statistics mean spending cuts and tax rises.
Cuts will be made at next week’s spring statement while tax rises will be announced in the October budget, according to analysts Pantheon Macro.
In response to the figures, Chief Secretary to the Treasury Darren Jones said: “We’re refocusing the public sector on our missions and, for the first time in 17 years, going through every penny of taxpayer money line by line, to make sure it is helping us secure Britain’s future”.
“At the core of this urgent mission is sound public finances, based on our non-negotiable fiscal rules. This government will never play fast and loose with the public finances.”