UK government borrowing overshoots expectations in November
UK government borrowing exceeded expectations in November but still fell year-on-year after tax receipts surged following Rachel Reeves’ first Autumn Budget.
The latest release from the Office for National Statistics (ONS) showed public sector borrowing topped £11.7bn in November.
City economists expected government borrowing to come in at £10.2bn over the month.
Despite this, the figure still marked the lowest amount of borrowing in November for four years and a £1.9bn fall from last year.
Grant Fitzner, chief economist at the ONS, said the main reason for the fall came from higher tax receipts, namely from a surge in national insurance contributions following Rachel Reeves’ hike to employer’s contributions in the 2024 Budget.
Across the entire financial year, borrowing in 2025 is higher than the year prior. Borrowing in the financial year to November 2025 was provisionally estimated at 4.4 per cent of gross domestic product (GDP) – this marked 0.1 percentage point more than in the same eight-month period of 2024.
Richard Carter, head of fixed interest research at Quilter Cheviot, said: “The good news for the UK economy is in short supply as the latest borrowing figures highlight.
“Since Labour came to power, the government has been on a borrowing binge as they look to not only plug the gaps in the public finances, but also build extra headroom and look to not rein in public spending.”
He added whilst the figures were lower than last year it was still “a hefty level of borrowing and indicates quite how much spending this Labour government is doing in the first few years”.
In October, the ONS data showed public sector borrowing had reached £17.4bn in a major pre-Budget blow. City economists expected government borrowing to come in at £15.2bn over the month.
The figures meant total borrowing in the current financial year had exceeded £100bn at £116.8bn – nearly £10bn higher than the figure forecast by the Office for Budget Responsibility (OBR).
Government borrowing costs jump
Borrowing costs endured a volatile November after the leaking whirlwind on the road to Rachel Reeves’ Autumn Budget panicked markets.
Carter said: “Markets do not believe growth is coming to the UK anytime soon. Indeed, the UK is likely to slip into recession if the latest GDP figures are anything to go by, and there is little sign of positive momentum being generated.
“Until markets can be convinced that sustained growth is possible, or that a better fiscal equilibrium can be found between tax and spending, the UK will continue to have a premium slapped on its borrowing rates compared to peers.”
At the beginning of November, it appeared the Chancellor was poised to hike income tax by 2p whilst cutting national insurance by the same amount in a move that would break Labour’s pledge to not raise taxes on ‘working people.’
The policy was teased by senior government figured in media rounds, as the Treasury was expected to be staring down a £30bn blackhole.
But a briefing to the Financial Times on 14 November revealed Reeves had ditched plans for an income tax hike and sent jitters through markets as bond traders feared the Chancellor would not be able to balance the books.
The yield on 10-year UK gilts – the benchmark for government borrowing costs – climbed by 13 basis points at the start of trading to 4.57 per cent – the biggest jump since the Chancellor was seen to shed a tear in the House of Commons.
The government later briefed the change in policy was due to “better than expected” forecasts from the Office for Budget Responsibility (OBR).
But this move later received backlash as Reeves was accused of “misleading” the public, with the Chancellor having previously known about the forecasts ahead of teasing the income tax hike.
In her Budget, Reeves froze the threshold on income tax – a move which many viewed as breaking Labour’s manifesto commitment not to raise income tax.
