UK borrowing through August runs £8.1 billion above the OBR's March path
The Office for National Statistics on Tuesday, September 22, 2026 put April-August public-sector net borrowing at £77.3 billion, £8.1 billion above the March forecast, five weeks before the October 28 budget.
Britain borrowed £18.3 billion in August, £3.5 billion more than the Office for Budget Responsibility had allowed for in its March forecast, after central-government spending overran and tax receipts came in slightly ahead. The Office for National Statistics published the figures on Tuesday morning, five weeks before Chancellor John Healey delivers his first budget. It was the second-highest August borrowing on the ONS monthly record, not adjusted for inflation, behind only 2020.
The miss is a spending problem. For the financial year through August, public-sector net borrowing was £77.3 billion, £8.1 billion above the OBR's March path. Central-government spending over those five months was £7.4 billion above forecast; receipts were only £1.1 billion above. Of that spending gap, net social benefits, including pensions, accounted for £2.4 billion and debt interest for £2.0 billion. Public-sector net debt was provisionally £2,985.5 billion at the end of August, or 93.8% of GDP, 0.8 percentage points below the OBR's forecast. The stock of debt is still tracking a touch light against the March outlook. The flow of new borrowing is not.
In August itself, central-government current receipts were £89.8 billion, £0.2 billion above the OBR profile, while total expenditure was £103.1 billion, £2.3 billion above forecast. Central government borrowed £13.3 billion against an £11.2 billion profile. Local government borrowed £4.5 billion. The ONS revised up each of the first four months of 2026-27.
Debt interest followed last spring's RPI, not August CPI
Central-government debt interest payable was £8.8 billion in August, the highest August figure since monthly records began in 1997, though below each of the first three months of this financial year. Of that, £2.1 billion was the capital uplift on index-linked gilts, which the ONS traced to a 0.3% rise in the retail prices index between May and June. The Debt Management Office adjusts those bonds to RPI, not CPI, with a three-month lag on gilts issued from April 2005.
That is a different number from the 3.1% annual CPI rate the ONS printed last week and that Governor Andrew Bailey set out in his September 17 letter to the Chancellor. August's CPI does not flow into August's gilt interest bill.
Healey's headroom, five weeks out
The OBR's March Economic and Fiscal Outlook put 2026-27 public-sector net borrowing at £115.5 billion. That forecast did not include an assessment against the fiscal rules; the watchdog has said it now does that once a year, at the Budget. Matt Swannell, chief economic adviser to the ITEM Club, told Reuters the rise in gilt yields since the spring forecast had halved Healey's room for manoeuvre, leaving just over £10 billion of headroom against the primary rules. Emma Reynolds, Chief Secretary to the Treasury, responding to Tuesday's figures, said the government remained committed to meeting those rules with a "buffer against uncertainty."
The OBR will re-run those rules at the Budget on Wednesday, October 28. Healey has pledged not to raise the main rates of income tax, VAT, corporation tax or national insurance. Options still being briefed around capital gains tax and property, including aligning CGT rates with income tax, are not decided policy. In July, Prime Minister Andy Burnham told Reuters that stamp duty would not change in this Budget.
By 10:00 a.m. in London, the 10-year gilt yield was 5.20%, down 0.023 percentage points on the day. That move lined up with oil's drop after Iran offered to reopen Hormuz rather than with the borrowing print.
UK equity funds barely moved
For anyone in the liquid US-listed UK equity funds, Tuesday morning changed little in the stocks they already own.
The Franklin FTSE United Kingdom ETF FLGB, which etf.net grades A, holds UK large-company stocks at a 0.09% expense ratio. The iShares MSCI United Kingdom ETF EWU, graded B, does the same job at 0.50%. Both are heavy in banks, energy and drugs: HSBC is about 11% of each, with Shell and AstraZeneca next. Through Monday's close, total return was 10.3% year to date in FLGB and 10.0% in EWU. Those are Monday's prices, before this print.
Healey now takes an £8.1 billion overshoot into October against headroom Swannell put at just over £10 billion.
Frequently asked
Why is borrowing running above forecast?
Spending, not weak taxes: central-government spending over the five months was £7.4 billion above forecast while receipts were only £1.1 billion above.
Why was the debt interest bill so high when inflation eased?
Index-linked gilts track the retail prices index with a three-month lag, so August's interest reflected last spring's RPI rather than the 3.1% annual CPI rate printed last week.
How much room does the Chancellor have at the Budget?
One adviser put the headroom against the primary fiscal rules at just over £10 billion, roughly half what it was at the spring forecast, after gilt yields rose.
Did the figures move UK markets?
No: the 10-year gilt yield slipped slightly, a move that tracked falling oil rather than the borrowing print, and the main US-listed UK equity funds barely reacted.