UK Faces Mounting Debt as Borrowing Exceeds Forecasts and Trade Talks Loom
The UK government borrowed £151.9 billion in the year to March 2025, significantly overshooting the £137.3 billion forecast. This surge in borrowing adds pressure to public finances as Chancellor Rachel Reeves heads to Washington, aiming to negotiate a trade deal with the US that could shield UK exports from looming tariffs.
The latest figures from the Office for National Statistics reveal that the borrowing hike—£20.7 billion higher than the previous year—was driven by increased spending on public sector wages and benefits. Despite a notable rise in tax income, the government’s debt now stands close to the total annual value of the economy, reaching levels not seen since the 1960s.
With borrowing costs rising due to high interest rates, speculation is growing that Reeves may be forced to introduce spending cuts or tax increases later this year to meet her self-imposed fiscal rules. One of her core pledges is to avoid borrowing for day-to-day expenses.
Darren Jones, Chief Secretary to the Treasury, reinforced the government’s commitment to these rules, stating, “We will never play fast and loose with the public finances.” Economists like Ruth Gregory of Capital Economics suggest that the overshoot could lead to more tax hikes in the Autumn Budget.
Amid economic headwinds, Reeves is focusing on growth strategies and is expected to push for a trade deal with the US to mitigate the impact of President Donald Trump’s protectionist tariffs. These tariffs, already affecting several global economies, are set to challenge UK exporters, especially as growth projections have been downgraded. The IMF now forecasts UK growth at 1.1% in 2025, down from 1.6%.
Despite the mounting pressure, government officials insist on accountability. Jones said the Treasury is reviewing expenditures “line by line” to eliminate waste. However, opposition leaders are critical. Shadow Chancellor Mel Stride labeled the borrowing figures “alarming,” while the Liberal Democrats called for the scrapping of what they termed Reeves’ “disastrous jobs tax.”
With debt interest payments rising to £4.3 billion in March alone and political scrutiny intensifying, the coming months will be crucial for the UK’s fiscal direction.
