Britain's government borrowed £18.3 billion in August, significantly more than economists expected, as higher public spending pushed the country's finances further above official forecasts ahead of the October budget.

Figures released by the Office for National Statistics on Tuesday showed public sector net borrowing reached £18.3 billion during the month.

That was £2.9 billion higher than in August 2025 and represented the second highest August borrowing figure since comparable monthly records began, behind only the pandemic affected year of 2020.

The figure was also substantially above the £15.5 billion median forecast in a Reuters poll of economists and exceeded every individual estimate submitted to the survey.

BORROWING REACHES £77.3 BILLION

The latest figures pushed borrowing during the financial year so far to £77.3 billion.

That leaves the deficit £8.1 billion higher than the amount forecast by the Office for Budget Responsibility for this stage of the year.

The overshoot creates additional pressure on the government's finances ahead of the October 28 budget.

Previous months' borrowing figures were also revised higher by the ONS, further worsening the fiscal picture.

SPENDING GROWTH OUTPACES REVENUE

Government revenue continued to grow, but increases in public spending were even larger.

The ONS said spending on public services, welfare payments and other government costs contributed to the higher borrowing requirement.

Inflation has increased the cost of several areas of government expenditure.

Higher prices can increase welfare payments and other spending commitments linked directly or indirectly to inflation.

The result was that stronger tax receipts were insufficient to offset the increase in expenditure.

AUGUST BORROWING RISES FROM LAST YEAR

The £18.3 billion borrowed in August compares with £15.4 billion during the same month last year.

Central government borrowing accounted for £13.3 billion, while local government borrowing was estimated at £4.5 billion.

Public corporations and other components accounted for the remainder.

The public sector current budget deficit was £12.4 billion during the month, up from £10.6 billion in August 2025.

FISCAL ROOM UNDER PRESSURE

The figures arrive at a sensitive moment for the government as preparations intensify for the October 28 budget.

The amount of room available to meet the government's fiscal rules has already been squeezed by higher government borrowing costs.

The fiscal buffer had stood above £24 billion in March but has fallen to just over £10 billion as gilt yields increased.

That leaves policymakers with less flexibility if economic conditions deteriorate or government spending exceeds expectations.

HIGHER BORROWING CREATES BUDGET CHALLENGE

The government now faces difficult decisions over how to bring borrowing closer to official forecasts while maintaining its spending commitments.

Possible fiscal measures could involve changes to taxation, spending or borrowing plans, although decisions for the October budget have not yet been announced.

The government's ability to meet its fiscal rules will depend partly on updated economic and borrowing forecasts accompanying the budget.

Changes in economic growth, inflation, interest rates and government bond yields can significantly alter the amount of fiscal room available.

CURRENT BUDGET DEFICIT ALSO ABOVE FORECAST

The deterioration extends beyond headline borrowing.

Britain's current budget deficit reached £51.9 billion in the financial year so far.

That compares with an Office for Budget Responsibility projection of £47.1 billion for the same period.

The difference illustrates the pressure created as government spending rises faster than expected.

INFLATION REMAINS AN IMPORTANT FACTOR

Inflation continues to complicate Britain's public finances.

Higher prices can increase tax revenues because wages and nominal spending rise, but they can simultaneously increase government expenditure.

Benefits and other payments can rise with inflation, while higher interest rates and government bond yields can increase the cost of servicing public debt.

That combination can limit the fiscal benefit generated by stronger tax receipts.

ATTENTION TURNS TO OCTOBER 28 BUDGET

The August figures provide the government with another difficult set of public finance numbers just over a month before the budget.

The £18.3 billion borrowing figure exceeded every economist estimate collected by Reuters and left borrowing substantially above the government's independent fiscal watchdog's forecast for the year so far.

Attention will now turn to the Office for Budget Responsibility's updated forecasts and the measures announced in the October 28 budget.

Those forecasts will determine how much room the government has within its fiscal rules and whether additional measures are required to bring the public finances back towards its targets.