Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy. Britain’s national debt is rising faster than expected after the government borrowed more than expected, again, to balance the books. The latest public finances data, just released, shows that the UK borrowed £18.3bn in August, which is £2.9bn more than in August 2025, as spending rose faster than government income.
This is higher than the £15.6bn forecast by the City. But more importantly, it’s £3.5bn above the Office for Budget Responsibility (OBR)‘s forecast for August. And it means that so far this financial year, the UK has borrowed £8.1bn more than the OBR’s forecast.
This all adds up to a headache for chancellor John Healey as he works on next month’s budget, as the recent bond market turmoil has eaten into his ‘headroom’ to keep within the fiscal rules. Emeritus professor Joe Nellis, head of economic research at accountancy and advisory firm MHA, says this morning’s data is “another reminder of the fiscal straitjacket facing the Government” ahead of the budget. But why is the deficit proving so hard to reduce?
The weakness lies mainly on the expenditure side. Higher inflation is impacting spending on public-sector pay, state benefits and pensions. And last week’s announcement that inflation has hit 3.1% will not have helped.
On top of this, the cost of servicing the national debt remains exceptionally high. Public sector net debt is just below £3 trillion, representing around 94% of GDP, the highest since the early 1960s. 3pm BST: Eurozone consumer confidence report
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