UK warned of economic doom loop as borrowing hits pandemic-era high
ONS data show September borrowing at £18 billion as spending outpaces tax receipts ahead of November Budget; economists warn of widening gap and potential policy impacts.
The UK economy faces what analysts describe as an economic doom loop as rising public spending outpaces tax revenues ahead of the November Budget. New data from the Office for National Statistics show the government borrowed £18 billion in September, the highest monthly borrowing since the Covid-19 outbreak, and £5.5 billion more than the Office for Budget Responsibility had forecast.
For the first five months of the current fiscal year, borrowing stood at £83.8 billion, the worst start to a year since the pandemic began.
Robert Jenrick, the former housing secretary and senior Conservative, warned: 'I'm absolutely terrified that unless Rachel Reeves changes course very quickly, we'll see a financial crisis.' He urged spending cuts, especially in welfare, and a reassessment of the benefits bill, arguing that the current path risks devastating public finances as borrowing costs rise and the pound wobbles on global markets.
Economists offered a range of estimates on how much extra revenue might be needed to balance the books. Paul Dales, an economist at Capital Economics, said the Chancellor could face a further £28 billion gap to plug in her Budget. Others have suggested the scale could be as large as £50 billion. Ewen Stewart, founder of Walbrook Economics, argued that another round of tax rises would impede growth and reinforce what he described as an economic doom loop. 'The borrowing numbers provide serious cause for alarm ahead of the Budget,' he said, stressing that public spending appears out of control.
Interest payments on the national debt rose to £8.4 billion last month as the government carried a £2.7 trillion stockpile of liabilities. The figures add urgency to the political debate ahead of the Budget, with lenders watching debt dynamics and the potential impact on gilt yields and the currency.
With the Budget due in November, Reeves faces political pressure to set out a credible plan to stabilise public finances while supporting growth. The debt total remains around £2.7 trillion, a constraint on spending decisions as markets watch gilt yields and the currency.