Chancellor Rachel Reeves’s headroom is shrinking as government borrowing in February exceeded the Office for Budget Responsibility’s (OBR) prediction, new data showed.
Reeves has insisted that financial prudence is key to the government’s economic agenda.
But the latest data released by the Office for National Statistics (ONS) suggests she has less headroom than expected.
The shortfall between income and spending was £10.7bn in February.
It exceeded a previous OBR forecast of £6.5bn.
In the financial year to February, the deficit was £132.2bn, some £14.7bn higher than at the same last year.
The provisional rate of net government debt to GDP at the end of February was estimated at 95.5 per cent.
The figures will be a headache for Reeves ahead of the Spring Statement next week.
The Chancellor is set to lay out radical adjustments to public spending in order for the government to meet its new military expenditure commitments.
Tax hikes have been ruled out by the government.
Darren Jones, Chief Secretary to the Treasury, hinted that the government would target the inactive workforce in the Statement next week.
“We must go further and faster to create an agile and productive state that works for people,” Jones said.
“That’s why we’re refocusing the public sector on our missions and, for the first time in 17 years, going through every penny of taxpayer money line by line, to make sure it is helping us secure Britain’s future through the Plan for Change. “
KPMG economist Dennis Tatarkov said the data “raised the risk” of the Chancellor missing targets.
“There may not be much room for the Chancellor to defer major tax and spending decisions to the Autumn Budget.
“Borrowing in February was some £4.2bn more than the OBR’s October prediction, and more bad news came in the revisions to past data, with January’s surplus revised down by £2.1bn.
“This means overall borrowing for 2024/25 is now expected to reach £148.7bn, far more than the OBR expected at the Budget.”
