London Daily

Focus on the big picture.
Monday, Oct 05, 2026

Rishi Sunak handed borrowing boost before spring statement

Rishi Sunak handed borrowing boost before spring statement

Figures could improve chances of tax cuts, but inflation drives up cost of government debt
Rishi Sunak has been handed a boost from figures showing lower government borrowing than official estimates on the eve of the spring statement.

The figures come despite a sharp rise in debt interest payments last month amid soaring inflation.

The Office for National Statistics said borrowing over the first 11 months of the financial year 2021-22 was £138.4bn, less than half the sum borrowed a year earlier and almost £26bn less than estimated by the Office for Budget Responsibility in October.

Analysts said the figures, helped by resilience in the jobs market after the end of furlough, could strengthen Sunak’s position at the spring statement to offer tax cuts or additional spending to cushion the blow from the big rise in living costs.

However, the latest snapshot showed a worsening picture for the public finances in February as the budget deficit – the gap between spending and income – came in at £13.1bn, the second-highest borrowing figure for that month since records began in 1993.

Inflation has pushed up interest payments on government debt by more than 50% to £8.2bn, the highest February figure on record. City economists had forecast a borrowing figure of about £8.1bn for the month.

Sunak is understood to have drawn up a range of options to help with the cost of living crisis, including a 1p cut to income tax, raising the national insurance threshold and a significant cut to fuel duty. However, he may use the February borrowing figures to insist on a more limited approach. Responding to the latest snapshot, the chancellor said it was now “more important than ever” to take a responsible approach to the public finances.

“With inflation and interest rates still on the rise, it’s crucial that we don’t allow debt to spiral and burden future generations with further debt,” he said. “Look at our record, we have supported people – and our fiscal rules mean we have helped households while also investing in the economy for the longer term.”

James Smith, the research director at the Resolution Foundation, said Sunak needed to take the opportunity to provide emergency support to families.

“The chancellor will approach the UK’s latest crisis – the tightest income squeeze in generations, exacerbated by the Russian invasion of Ukraine – with the public finances in better shape than expected, increasing the chance of significant policy action to support families through the tough year ahead,” he said.

Despite the hit from higher debt servicing costs, the recent rise for inflation is expected to have some benefits for the public purse. Government income from fuel duty and VAT on energy bills has increased over the past year, while Sunak’s plan to freeze the income tax personal allowance and higher-rate threshold over four years is expected to generate £21bn, more than double the amount budgeted for owing to rising inflation, according to the Institute for Fiscal Studies.

Despite the highest rates of inflation since the early 1990s, the government’s debt servicing costs as a proportion of national income remain low compared with recent decades.
Newsletter

Related Articles

0:00
0:00
Close
BT Accused of Pressuring Vulnerable Customers During Digital Landline Shift
British Carmakers Warn of Growing Pressure From EU-China Tariff Dispute
Green Party of England and Wales Adopts Motion Defining Zionism as Racism
Medical Charity Threatens NHS Legal Action Over Two-Year Autism and ADHD Assessment Waits
British Transport Police Report Record Rise in Violence on Railways
Glasgow Council Workers Face Pay Cuts Under Fire-and-Rehire Plan
British Medical Groups Press Prime Minister Andy Burnham to Cancel £330 Million Palantir NHS Contract
UK Faces Record Bluetongue Outbreak Across Livestock Farms
UK Schools Report Thousands of Child-on-Child Sexual Offences
High Court Overturns Ban Blocking Gaza Families From Reuniting With Relatives in UK
G7 Authorizes Emergency Fuel Release as UK Diesel Prices Hit £2 a Litre
France and Italy Draw 1-1 in Nations League Match
Pope Leo XIV and Prince Albert II of Monaco Meet in Metz
SNCF Expands Low-Cost Ouigo High-Speed Service Between Lyon and Bordeaux
Paris Expands Dedicated Cargo Bike Routes for Urban Deliveries
French Film Industry Pushes for Tighter Streaming Investment Rules
Marseille Court Hands Down Prison Terms in Public Procurement Corruption Case
LVMH and Kering Rely on US Demand as Chinese Luxury Spending Slows
Toulouse Aerospace Sector Launches €80 Million Modernization Fund
Javier Milei Courts French Investment in LNG and Lithium
Mistral AI Launches Sovereign Model for European Public Services
French Competition Authority Fines Retailers €40 Million Over Misleading Promotions
France Records Exceptional Electricity Exports as Nuclear Output Recovers
Dassault Aviation Expands Rafale Assembly Capacity at Mérignac
Sanofi Invests €1 Billion in New Biologics Production Hub Near Lyon
France Protests Germany’s Extension of Border Controls Into 2027
French Public-Sector and Transport Unions Threaten National Strike
France Deploys Riot Police After Violence in Lyon Suburbs
French Anti-Terrorism Prosecutors Investigate Radicalized Flydubai Co-Pilot
France’s Defense Budget Surpasses NATO’s 2% of GDP Target
French Government Faces No-Confidence Threat Over Budget
France and G7 Release 100 Million Barrels From Strategic Oil Reserves
France Convenes Emergency Defense Council Over Threats to Commercial Shipping
France and Germany Coordinate Military Response After Russian Strikes on Kyiv Infrastructure
UK Police Release Six Iranian Nationals on Bail After RAF Fairford Security Alert
UK Business Confidence Falls as Energy Costs and Tax Uncertainty Rise
Cornwall Insight Warns UK Energy Bills Could Rise 16% in January
UK Introduces Zero VAT on Household Electricity Bills
UK 30-Year Gilt Yield Hits 6% as Bond Market Pressures Intensify
UK Introduces Stricter Subcontractor Checks and Expanded Trade Union Access
Green Party Proposes Three-Year Emergency Freeze on Private Rent Increases
UK Treasury Committee Seeks Tax Clarification Over Manchester City Investigation
Royal Marines Deploy to Faroe Islands for Northern European Security Exercise
UK Business Confidence Weakens as High Costs Delay Investment
UK GDP Growth Revised Up to 0.5% in Second Quarter
Bank of England Warns of Financial Stability Risks From Autonomous AI
UK Expands Early Prisoner Release Scheme to Ease Overcrowding
UK Records Worst Bluetongue Outbreak on Record Across Livestock Farms
UK Government Faces Shrinking Fiscal Headroom Ahead of October 28 Budget
UK 30-Year Gilt Yield Reaches 6% as Energy Shock Drives Borrowing Costs Higher
×