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Rachel Reeves experienced yet another setback before today’s Spring Statement as government borrowing exceeded projections.
The public sector borrowed £10.7 billion last month — marking the fourth-highest February figure ever recorded and surpassing the £7 billion forecast by analysts.
The total amount for the year ending in February reached £132.2 billion, which is £20.4 billion higher than what was predicted by the Office for Budget Responsibility (OBR) at the Treasury as late as October.
The disparity was caused by increased expenditure on public services such as social benefits, even though tax receipts had risen significantly compared to the same period in 2024.
The statistics provided by the Office for National Statistics (ONS) starkly reveal the magnitude of the challenge awaiting the Chancellor as she presents her financial report on Wednesday.
Experts think Ms. Reeves must address a £10 billion gap in the finances—or potentially even larger—despite previously announcing £5 billion in cuts to benefits.
Her autumn budget proposals have faced criticism due to a significant deceleration in economic growth and increasing costs of servicing public debt—raising concerns that the planned increase in national insurance contributions along with President Trump’s trade disputes could exacerbate the situation further.
Ms. Reeves has dismissed the possibility of tax alterations for now, indicating that the funds must instead be sourced through reductions in spending.
However, Labour Members of Parliament are already preparing to oppose any measures that look like austerity.
The Chief Secretary to the Treasury, Darren Jones, stated today: "We need to advance more swiftly in order to establish a flexible and efficient government that serves the public."
That’s why we’re redirecting the focus of the public sector towards our objectives, and for the first time in 17 years, examining each pound of taxpayers' funds meticulously to ensure they contribute to securing Britain's future via the Plan for Change.
The ONS mentioned that public sector net borrowing exceeded February 2024 levels by £100 million.
It was also £4.2 billion higher than what the government's official forecaster had predicted.
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