(March 21): UK Chancellor of the Exchequer Rachel Reeves is set to significantly overshoot her borrowing forecasts for the current fiscal year, highlighting the fragile state of the public finances ahead of a key economic statement next week.

The budget deficit in the first 11 months climbed to £132.2 billion (US$171 billion or RM755.8 billion) — £20.4 billion more than the Office for Budget Responsibility predicted in October. Borrowing in February alone was £10.7 billion, above the expectation of the OBR and economists.

The figures are the final snapshot of the Treasury finances before Reeves delivers her Spring Statement on March 26. Having lost the slender £9.9 billion margin she had in October against her main fiscal rule, the chancellor is expected to announce billions of pounds of cuts to public spending and welfare.

At the budget, Reeves angered businesses that bore the brunt of £40 billion of tax rises to boost public services and plug a hole left by the previous Conservative government. Her pivot to spending cuts is now sewing divisions in the ruling Labour Party, which has slumped in opinion polls since coming to power last summer.

The spring statement will unveil new forecasts from the OBR. In October, the fiscal watchdog predicted a deficit of £127.5 billion for 2024-25 as a whole but the shortfall is now likely to come in closer to £150 billion. Borrowing in the first 11 months was £14.7 billion higher than a year earlier.

Further out, Reeves’ pledge to balance day-to-day spending and tax revenue by the end of the decade has been undermined by higher borrowing costs and weaker growth, with Donald Trump’s tariff wars now casting further doubt over the outlook.

February is generally one of the better months for the public finances, as self-assessed income tax due by a January 31 deadline continues to come in. However, revenue for the year as a whole has come in below forecast, with cuts to employee national insurance by the last government eroding a key source of income. Public spending has risen at a faster pace, pushed higher by the cost of welfare and generous public-sector pay increases.  There were upward revisions to borrowing between April and January.

Net debt stood at £2.8 trillion, or 95.5% of GDP  in February — close to levels last seen in the early 1960s, the Office for National Statistic said. Labour is now targeting a wider gauge of debt known as public sector net financial liabilities, with a goal to have it falling as a share of the economy by the end of the decade. Last month, PSNFL was 82.9% of GDP, or £2.4 trillion. That’s over two percentage points higher than a year earlier.

Uploaded by Magessan Varatharaja