UK government borrowing surged to £20.2 billion in September 2025, setting a five-year record for the month and underlining the mounting fiscal pressures facing Chancellor Rachel Reeves ahead of her second budget. According to the Office for National Statistics (ONS), this figure represents a £1.6 billion increase from September 2024 and is the highest for any September since 2020, when pandemic spending sent deficits soaring. The jump in borrowing comes despite a near 9% rise in tax receipts compared to the previous year—a sign that higher revenues have not been enough to offset rising costs and persistent economic headwinds.
The ONS data, as reported by BBC and Sky News, paints a sobering picture: government spending in September reached a provisional £90.7 billion, with a staggering £9.7 billion—up by nearly £4 billion year-on-year—dedicated solely to servicing the national debt. This marks the highest September debt interest payment on record. Public sector debt now stands at 95.3% of gross domestic product (GDP), a level not seen since the early 1960s.
Borrowing for the financial year to date has hit £99.8 billion, the second-highest total for the first six months of any year since monthly records began in 1993, surpassed only by the extraordinary pandemic year of 2020. This puts the government £7.2 billion above the borrowing forecast made by the Office for Budget Responsibility (OBR) in March, with the OBR’s updated projections due next month likely to highlight an even larger fiscal gap.
Debt interest payments have become a particularly acute problem, driven by inflation-linked bonds and rising interest rates. "The interest payable on central government debt was higher than any previous September on record," Nabil Taleb, economist at PwC UK, told Sky News. "Higher debt servicing costs as a share of total revenues will leave the public finances more exposed to future economic shocks."
The inflationary backdrop is hardly helping matters. Official figures due out this week are expected to show the main consumer prices index running at 4%, the steepest pace since January 2024. Meanwhile, the UK’s jobless rate has climbed to 4.8%, up from 4.1% a year earlier. These figures, as noted by Sky News, reflect the lingering impact of Brexit, the US trade war, and a sluggish domestic recovery, all of which have complicated the chancellor’s efforts to balance the books.
Chancellor Rachel Reeves faces a daunting challenge as she prepares for the 26 November budget. The so-called “fiscal buffer”—the headroom she needs to meet her self-imposed fiscal rules—has been eroded by weaker-than-expected growth, higher borrowing costs, and spending pressures. Some analysts estimate a black hole of up to £30 billion. The respected Institute for Fiscal Studies (IFS) has argued that Reeves may need to go further than previously planned, advocating for income tax increases to restore at least £10 billion of breathing space.
Nick Ridpath, research economist at the IFS, summed up the dilemma to BBC News: "High debt interest spending, tiny headroom and a looming productivity downgrade" could make things "even trickier" for the chancellor. Capital Economics, another leading consultancy, projects that the government will have to raise £27 billion in the budget, with "higher taxes on households having to do the heavy lifting." Chief economist Paul Dales noted, "The chancellor would love tax receipts to be higher, but that would depend on faster growth in the economy."
Despite speculation about tax hikes, Reeves has consistently refused to break Labour’s manifesto pledge not to raise employee national insurance contributions, VAT, or income tax. However, she has softened her language somewhat, acknowledging that "the world has changed." According to Sky News, her reluctance to increase borrowing is understandable given the high yields being demanded of the UK on bond markets—long-term borrowing costs recently hit their highest levels since 1998, with 30-year government bond yields peaking at 5.7% in August before easing to below 5.3% by October. The benchmark 10-year yield has also fallen from 4.8% to about 4.5% in recent weeks, providing some relief.
To stimulate growth and potentially offset some fiscal pain, the government has announced a series of reforms. At the Regional Investment Summit in Birmingham on October 21, Reeves unveiled plans to scrap paperwork and red tape, a move she claims will save companies almost £6 billion a year. There has also been talk of removing VAT from energy bills to help households weather the ongoing cost-of-living crisis.
However, the chancellor’s job has been made harder by government U-turns on planned welfare and winter fuel payment cuts. And while tax receipts have risen—partly due to increases in employers’ national insurance contributions—spending has also climbed, driven by pay rises, inflation, and inflation-linked increases to state benefits. The ONS figures even include a correction to earlier data, after an error was found in how VAT receipts had been recorded.
Political reactions to the latest borrowing figures have been swift and sharp. Chief Secretary to the Treasury James Murray struck a reassuring note, telling Sky News and BBC: "This government will never play fast and loose with the public finances. We know that when you lose control of the public purse it’s working people who pay the price. That’s why we plan to bring down borrowing, and according to IMF data, are set to deliver the largest primary deficit reduction in both the G7 and G20 over the next five years. We are cutting waste, improving efficiency and transforming our public services for the future—so that we can be rid of costly debt interest, instead putting that money into our NHS, schools and police."
The opposition, though, was quick to pounce. Shadow chancellor Mel Stride accused Reeves of losing control of the public finances, warning that "the next generation are being saddled with Labour's debts." Liberal Democrat Treasury spokeswoman Daisy Cooper echoed those concerns, stating that "alarm bells should be ringing for the government ahead of the Budget." She criticized both the Conservatives for leaving the economy in "a terrible state" and Labour for "mistake after mistake, failing to get our economy growing again."
As the countdown to the November budget continues, the chancellor faces a series of tough choices. With fiscal headroom exhausted, borrowing costs elevated, and both inflation and unemployment ticking higher, Reeves must decide whether to raise taxes—potentially breaking election promises—or cut spending even further. The IFS, for its part, believes that a "bold" tax-raising budget could help restore market confidence and bring down borrowing costs in the long run. But with public sector debt at its highest in decades and political pressure mounting from all sides, there are no easy answers.
The coming weeks will reveal whether the government can chart a credible path through these fiscal storms or whether the UK’s public finances are in for yet more turbulence.
