UK government borrowing surged past expectations in October 2025, setting the stage for a tense week ahead as Chancellor Rachel Reeves prepares to unveil her Budget. According to figures released by the Office for National Statistics (ONS) and reported by BBC and Dow Jones, the government borrowed £17.4 billion in October—substantially higher than analysts’ forecasts of around £15 billion and outpacing projections made by the Office for Budget Responsibility (OBR) earlier this year.
This latest borrowing figure, while £1.8 billion lower than October 2024, still marks the third-highest October borrowing since monthly records began in 1993. The government’s fiscal gap has become a central issue, with the total borrowing for the first seven months of the financial year reaching £116.8 billion. That’s not only £9 billion more than the same period last year but also £9.9 billion above the amount projected by the OBR in its March 2025 forecasts, as highlighted by Dow Jones.
The ONS data arrives at a critical moment, just days before Chancellor Reeves is due to present her Budget on November 26, 2025. With the government’s finances deteriorating faster than anticipated, Reeves has confirmed that both tax rises and spending cuts are on the table. The pressure is on: the OBR’s latest assessments put the gap in public finances that Reeves needs to fill at a hefty £20 billion.
James Smith, an economist at investment bank ING, told the BBC that the figures would not be welcomed by the Chancellor in the run-up to her Budget. However, he noted that Reeves’ fiscal rules focus on the longer term rather than the immediate numbers. “Today's data is not helpful, it shows that the government is borrowing more than expected, but it doesn't necessarily change the decisions next week,” Smith remarked on the BBC’s Today programme.
The Chancellor’s self-imposed fiscal rules are clear. First, the government must not borrow to fund day-to-day public spending by the end of this parliament. Second, government debt must be falling as a share of national income by the same deadline. Meeting these targets has become more challenging as borrowing costs remain stubbornly high and revenues lag behind projections. The BBC reports that £1 of every £10 in taxpayer money is currently spent on paying interest on the national debt, a figure that has sparked concern across the political spectrum.
Chief Secretary to the Treasury James Murray underlined the government’s commitment to reducing borrowing, stating, “That money should be going to our schools, hospitals, police and armed forces. That is why we are set to deliver the largest primary deficit reduction in both the G7 and G20 over the next five years—to get borrowing costs down.”
Yet the government’s critics argue that more decisive action is needed. Shadow Chancellor Sir Mel Stride pointed out that borrowing so far this financial year is the highest on record outside the pandemic. He challenged the government’s approach, saying, “If Labour had any backbone, they would control spending to avoid tax rises next week.”
Nick Ridpath, a research economist at the Institute for Fiscal Studies, noted that government borrowing for the year to date continues to exceed forecasts from the OBR “to the tune of around £10bn.” He cautioned that operating with minimal fiscal margin for error is risky and suggested that the Chancellor might “sensibly take steps to increase her so-called ‘fiscal headroom’ at next week’s Budget.”
The ONS’s Grant Fitzner offered some explanation for the numbers, highlighting that, “While spending on public services and benefits were both up on October last year, this was more than offset by increased receipts from taxes and National Insurance contributions.” Despite these higher receipts, the overall borrowing figure remains uncomfortably high by historical standards.
But it’s not just government borrowing that’s raising eyebrows. The ONS also reported a decline in retail sales for October, with a 1.1% drop marking the first monthly fall since May. Supermarkets, clothing stores, and online retailers all felt the pinch, with some retailers blaming the dip on shoppers waiting for Black Friday deals later in November. Fitzner noted, “Supermarkets, clothing stores and online retailers all saw slower sales, with feedback from some retailers that consumers were waiting for November’s Black Friday deals.”
Ruth Gregory, deputy chief UK economist at Capital Economics, described the combined borrowing and retail sales data as painting a “pretty grim picture” of the economy. However, she also pointed out that the monthly fall in retail sales “isn’t quite as bad as it looks” since it follows four consecutive months of increases. Still, she acknowledged that consumer confidence has declined, suggesting that “consumers aren’t exactly chipper at the moment.”
The financial year’s borrowing tally to October 2025—£116.8 billion—now stands as the second-highest for the period April to October since records began in 1993, surpassed only by the extraordinary borrowing during the pandemic in 2020. The ONS’s bar chart, as reported by BBC, shows a clear trend: after reaching £16.4 billion in October 2023, borrowing rose to £19.3 billion in October 2024 before settling at £17.4 billion this October. The persistence of high borrowing levels raises questions about the government’s ability to stick to its fiscal rules without resorting to unpopular measures.
With the Budget looming, the Chancellor faces a tricky balancing act. On one hand, she needs to reassure financial markets and voters that the government can rein in borrowing and debt. On the other, she must decide where the axe will fall—on spending, on tax relief, or on new investment. The OBR’s £20 billion gap in public finances is a stark reminder of the scale of the challenge ahead.
As the government prepares its annual budget statement, the choices made will reverberate across the economy—from public services to household finances. The debate over how best to restore fiscal discipline is sure to intensify, with all eyes on Chancellor Reeves as she steps up to the dispatch box next week. The numbers may be daunting, but the stakes for the UK’s economic future are even higher.
In the meantime, ordinary Britons are left watching and waiting, hoping that the government can chart a course through these turbulent fiscal waters without sacrificing the services and stability they rely on. The coming days will reveal whether that hope is well placed—or if tougher times still lie ahead.
