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UK Government Borrowing Surpasses Expectations Amid Rising Spending

Recent official data reveals that the UK government’s borrowing in the year leading up to March exceeded forecasts, driven primarily by increased expenditure on salaries and benefits. The borrowing figure reached £151.9 billion, marking an increase of £20.7 billion compared to the previous year.

This amount significantly surpassed the £137.3 billion predicted by the Office for Budget Responsibility, the government’s official forecasting body. The Office for National Statistics (ONS), which published the figures, noted that this borrowing level represents the third highest on record for a financial year.

Grant Fitzner, the chief economist at the ONS, commented on the data, stating, “Despite a substantial boost in income, expenditure rose by more, largely due to inflation-related costs, including higher pay and benefit increases.” He further indicated that government debt remains close to the annual economic output, reflecting levels not observed since the early 1960s.

As Chancellor Rachel Reeves prepares to participate in the annual meetings of the International Monetary Fund (IMF) and the World Bank in Washington, these higher borrowing figures present a challenging backdrop. On Tuesday, the IMF adjusted its UK economic growth forecast for 2025 down to 1.1%, down from an earlier prediction of 1.6%, citing impacts from international trade tariffs.

The ONS reported that borrowing specifically for March was £16.4 billion, marking the third highest March borrowing since records began in 1993. This trend of increased borrowing has led some economists to speculate that the Chancellor may have to consider spending cuts or tax increases in order to adhere to her self-imposed fiscal guidelines.

Ruth Gregory, deputy chief UK economist at Capital Economics, suggested that “Reeves may not be too far away from having to raise money again in the Autumn Budget, by cutting spending and/or raising taxes, to meet her fiscal rules.”

Darren Jones, the chief secretary to the Treasury, assured that the government is committed to prudent fiscal management, stating, “We will never play fast and loose with the public finances,” and reiterated that their rules on borrowing are “non-negotiable.” He added that for the first time in 17 years, the government is meticulously reviewing taxpayer expenditures to eliminate wasteful spending.

In contrast, shadow business secretary Andrew Griffith described the borrowing figures as “grim.” He pointed out that the combined impact of the IMF’s growth downgrades and high borrowing figures indicate a failure to achieve prosperity through spending alone. “Only businesses create jobs and growth,” he argued, criticizing the government for increasing taxes and imposing additional regulations that burdens wealth creators.

Source
www.bbc.com