New official figures have revealed that UK government borrowing for November came in higher than financial markets had predicted, though it still represented a significant reduction compared to the same period last year.
Borrowing Figures and Budget Impact
The Office for National Statistics (ONS) reported that public sector borrowing reached £11.7 billion in November 2025. This figure overshot the expectations of City economists, who had forecast borrowing of approximately £10.2 billion for the month.
Despite exceeding forecasts, the November 2025 borrowing total was the lowest recorded for that month in four years. It also marked a substantial year-on-year decrease of £1.9 billion.
Grant Fitzner, the chief economist at the ONS, attributed the annual fall primarily to a surge in tax revenues. He specifically pointed to increased national insurance contributions following Chancellor Rachel Reeves' decision to raise employer contributions in her 2024 Budget.
Volatile Fiscal Landscape and Market Jitters
The path to the Autumn Statement was fraught with volatility, which significantly impacted government borrowing costs throughout November. Early in the month, speculation was rife that the Chancellor was preparing to increase income tax by 2p while cutting national insurance by a similar amount—a move that would have contradicted Labour's pledge not to raise taxes on 'working people'.
This speculation, fueled by briefings from senior government figures, caused anxiety in financial markets, particularly as the Treasury was reportedly facing a potential £30 billion shortfall.
Markets were further unsettled when a Financial Times report on 14 November indicated Reeves had abandoned the income tax hike plan. Bond traders reacted with concern over the government's ability to balance its books. Consequently, the yield on 10-year UK government bonds—a key indicator of borrowing costs—jumped by 13 basis points to 4.57% at the start of trading, representing the largest surge since the Chancellor's emotional appearance in the House of Commons.
The government later clarified that the policy U-turn was due to "better than expected" forecasts from the Office for Budget Responsibility (OBR). However, this explanation sparked controversy, with Reeves facing accusations of misleading the public, as it emerged she had prior knowledge of the OBR forecasts before hinting at the tax increase.
Broader Fiscal Picture and Political Fallout
Looking at the wider financial year, the data presents a more complex picture. While November saw a year-on-year improvement, total borrowing for the 2025/26 financial year to date has surpassed £116.8 billion. This cumulative figure is nearly £10 billion higher than the OBR's initial forecast and remains above the level seen in the equivalent period of the previous financial year.
The Chancellor's final Autumn Budget included a freeze on income tax thresholds, a measure critics have labelled as a breach of manifesto commitments. This comes after the significant pre-Budget blow in October, where borrowing hit £17.4 billion against an expected £15.2 billion.
The combined figures underscore the intense pressure on Rachel Reeves to manage the public finances amidst economic uncertainty and political promises, with each fiscal announcement being closely scrutinised by both the markets and the public.
