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.
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.
At the beginning of the month, 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 – which shows how expensive government borrowing is – climbed by 13 basis points at the start of trading to 4.57 per cent – the biggest jump since the Chancellor was seen teary 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 a manifesto break.