The UK government borrowed far more than expected in the year to October, leaving Chancellor Rachel Reeves under pressure to find extra fiscal headroom ahead of next week’s budget.
New data from the Office for National Statistics (ONS) shows borrowing reached £17.4bn in October, the third-highest deficit for that month on record.
This year borrowing stands at £116.8bn — £9.9bn above the Office for Budget Responsibility’s (OBR) forecast.
Economists warn the gap raises serious concerns for Reeves’s ability to meet her fiscal rules, with new OBR projections due alongside the budget.
Martin Beck, chief economist at WPI Strategy, said borrowing in 2025–26 could overshoot forecasts by around £10bn, pushing the deficit close to 5% of GDP.
Combined with market volatility, policy reversals, and weak productivity, he said the chancellor’s room for manoeuvre has almost certainly vanished.
Analysts stress that bond markets will scrutinise the budget closely, particularly the size of Reeves’s remaining headroom.
Nick Ridpath of the Institute for Fiscal Studies said the unexpectedly high deficit underscored the risk of operating with “minimal fiscal margin for error”.
Government spending in October was £3.7bn higher than a year earlier, driven by rising benefits and public-sector pay. Debt interest payments alone hit £8.4bn due to inflation-linked bonds.
Reeves is expected to raise taxes and outline a cost-of-living package, while freezing prescription charges for another year. The chancellor aims to bring the current budget into surplus by 2030, but October’s deficit — £12.6bn — was £2.6bn worse than the OBR expected.
The release came as retail sales fell 1.1% in October, signalling growing consumer caution ahead of the budget.
