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Public sector borrowing in August has jumped to its highest stage in 5 years, elevating fears of giant tax hikes within the autumn to stability the books.
Borrowing – the distinction between complete public sector spending and revenue – was £18bn in August 2025, £3.5bn greater than final 12 months and the best since 2020, when the financial system had floor to a halt within the wake of coronavirus lockdowns.
Borrowing within the monetary 12 months to August 2025 was £83.8bn, £16.2bn greater than in the identical five-month interval of 2024 and the second-highest April to August borrowing since month-to-month information started in 1993.
Total, public sector internet debt excluding public sector banks has been estimated at 96.4 per cent of GDP on the finish of August 2025; 0.5 share factors greater than final 12 months and remaining at ranges final seen within the early Nineteen Sixties.
Tax hikes on the playing cards
It comes as the federal government is extensively anticipated to unveil main hikes in taxes in its Autumn Funds to fund ballooning spending commitments.
Lindsay James, funding strategist at Quilter, mentioned: “As soon as once more the UK authorities’s borrowing for August highlights why it appears all however sure that tax rises are coming on the Funds in two months’ time.
“These figures are staggering and aren’t exhibiting an financial system that’s in impolite well being.”
James Murray, Chief Secretary to the Treasury, mentioned: “This Authorities has a plan to carry down borrowing as a result of taxpayer cash ought to be spent on the nation’s priorities, not on debt curiosity.
“Our focus is on financial stability, fiscal duty, ripping up pointless pink tape, tearing out waste from our public providers, driving ahead reforms, and placing more cash in working individuals’s pockets.”
The Treasury might be pressured to boost as a lot as £50bn in contemporary tax hikes to remain inside its fiscal guidelines, based on the Nationwide Institute of Financial and Social Analysis (NIESR), laying naked the size of the ache that might be wrought on companies by Chancellor Rachel Reeves within the coming months.
The additional money wanted could be equal to a staggering 5 per cent hike on each the essential and better charges of revenue tax, NIESR mentioned, including {that a} freeze on present tax thresholds would rake in an additional £8.2bn.
“The actually disappointing factor from my perspective was that when Labour got here in there didn’t appear to be a plan on the desk,” mentioned NIESR deputy director, professor Stephen Millard.
“A number of issues the chancellor is dealing with now may have been headed off on the move if they’d are available in with a transparent plan.”
Millard mentioned there have been “actually exhausting selections the chancellor goes to must make if she goes to boost that £50bn.
“That requires massive will increase in taxes – fiddling on the edges is just not going to do.”
