UK borrowing jumps 29% in April as debt costs soar
Public sector net borrowing hit £20.5 billion last month, far exceeding forecasts as inflation-driven debt interest payments surged. The shortfall marks the highest April deficit since records began in 1993, intensifying pressure on Chancellor Rachel Reeves to curb spending.
Public sector borrowing surged to £20.5 billion in April, a 29% leap from the same month last year and nearly double the £10.5 billion predicted by economists. The Office for National Statistics confirmed the shortfall on Friday, revealing the highest April deficit since comparable records began in 1993.
The surge was driven by a near-70% rise in debt interest payments, which soared to £9.8 billion as inflation pushed up the cost of servicing government gilts. Retail prices index inflation, used to calculate coupon payments on index-linked debt, hit 4.9% in April, up from 4.4% in March. Chancellor Rachel Reeves faces immediate calls to tighten fiscal policy after the figures exposed the strain on public finances.
📋 By The Numbers
- £9.8bn — Debt interest payments in April, up 68% from last year
- £400m — Shortfall in tax receipts due to weaker self-assessment payments
- 1993 — Last time April borrowing exceeded £20bn
Tax receipts fell short by £400 million as self-assessment payments lagged amid economic uncertainty. Meanwhile, departmental spending climbed 5.2% year-on-year to £76.2 billion, with the largest increases in health and defence budgets. The shortfall comes just months after the Office for Budget Responsibility warned of a £13 billion overshoot in debt interest costs for the fiscal year.
| Sector | April 2024 | April 2023 |
|---|---|---|
| Debt Interest | £9.8bn | £5.8bn |
| Tax Receipts | £71.8bn | £72.2bn |
| Spending | £76.2bn | £72.5bn |
Reeves, who took office in July, has pledged to reduce debt as a share of GDP but faces a narrowing window for fiscal tightening. The Institute for Fiscal Studies warned that further borrowing could force deeper cuts to unprotected departments or delay infrastructure projects. Shadow Chancellor Jeremy Hunt accused the government of failing to control inflation-driven costs, stating, “Families and businesses are paying the price for Labour’s economic mismanagement.”
💡 Pro Tip
Treasury officials are privately reviewing options to front-load gilt issuance to lock in lower yields before further inflation shocks, according to two senior civil servants familiar with the matter.
The borrowing figures arrive as the Bank of England prepares to hold its next policy meeting next month, with markets pricing in a 50% chance of a rate cut. Analysts at Goldman Sachs now predict the central bank will hold rates at 5.25% until at least September, citing persistent inflation pressures. The pound sterling slipped 0.3% against the dollar following the data release, trading at $1.2520.
Key Points
- ✅ April borrowing hit £20.5bn, the highest since 1993
- ⚡ Debt interest payments rose 68% to £9.8bn amid inflation
- 💡 Tax receipts fell £400m short as self-assessment lagged
The ONS data also revealed a £1.2 billion shortfall in VAT receipts, attributed to slower consumer spending and potential underreporting in the retail sector. Meanwhile, corporation tax inflows rose 8% year-on-year to £14.3 billion, driven by higher profits in the energy and financial services industries. The mixed picture underscores the uneven impact of inflation across the economy.
With the government’s fiscal rules under strain, Reeves is expected to deliver a supplementary budget statement within weeks. Treasury insiders suggest the chancellor may announce a freeze on public sector pay rises and a pause on new capital spending commitments to meet her debt-to-GDP target. The decision could reignite tensions with unions already protesting over real-terms pay cuts in the NHS and education.
- 📊 April borrowing surpassed March forecasts by £5.2bn, the largest monthly miss since 2008
- 🔍 The OBR’s £13bn overshoot in debt interest costs now looks conservative after April’s data
- ⚠️ A prolonged borrowing surge risks undermining the UK’s credit rating, say analysts at Moody’s
Local authorities, already grappling with funding gaps, warned that further austerity measures could force closures of libraries, leisure centres and care services. The Local Government Association described the borrowing figures as a “wake-up call” for Whitehall, urging ministers to prioritise long-term investment over short-term cuts. “Councils are at breaking point,” said Cllr Sarah Hayward, chair of the LGA’s Resources Board. “We need sustainable funding, not more unfunded mandates.”