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Is Britain Actually Broke?
22OCT

Debt beat the forecast, borrowing missed it

3 min read
16:23UTC

The ONS put net debt at 94.1% of GDP on 21 August, 0.3 points below the OBR profile, and reported borrowing £2.3bn above that same profile in the same bulletin.

← Back to Debt passes £3trn, its ratio below forecastJump to analysis ↓
EconomicDeveloping
Key takeaway

One bulletin beat the OBR forecast on debt and missed it on borrowing.

The Office for National Statistics (ONS) put public sector net debt at £2,984.9bn at the end of July 2026, equal to 94.1% of gross domestic product (GDP), in the monthly public finances bulletin it published on 21 August⁠1. Net debt on that measure is what the state owes to the UK private sector and to overseas holders, less the liquid assets it could call on. That ratio sits 0.8 percentage points lower than a year earlier and 0.3 points below the profile set by the Office for Budget Responsibility (OBR), the government's independent forecaster. GDP is the value of everything the economy produces in a year, so 94.1% means the state owes a little less than the country makes in twelve months.

Borrowing in July came to £1.8bn, which is £2.3bn above the OBR profile, and borrowing in the financial year to July stands at £56.7bn, £6.0bn (9.6%) below the same period last year and again £2.3bn above the profile⁠2. The same bulletin therefore reports the opposite result on the other measure. The overshoot is larger than the borrowing itself, and the whole of the financial year's miss arrived in one month rather than building across four. Neither comparison belongs to this desk: the ONS states both against the OBR's numbers, in one document, on one day.

Debt is £95.9bn higher in cash than a year earlier while the ratio is lower. The ONS says its updated estimate of January to March output came in above the first estimate, "resulting in lower debt-to-GDP ratios for recent months than previously reported"⁠3, and it puts no number on that effect. The share of the economy fell because the economy was re-measured, not because the borrowing stopped.

The forecast beaten on one line and missed on the other was published on 3 March 2026, with the monthly profiles the ONS scores against following in April, and the OBR does not refresh any of it until the Budget on 28 October. Debt interest payable by central government ran to £7.7bn in July alone, against £7.0bn in July 2025, and that bill is settled before a single bin is emptied or a single appointment is booked. This desk's June cell of 94.9% cannot be set beside 94.1%, because the ONS did not restate the June ratio on the new output base and published no replacement for it.

Deep Analysis

In plain English

The government keeps a running total of everything it owes, called public sector net debt. To judge whether that total is manageable, it is usually shown as a share of GDP, the size of the whole economy in a year, because a bigger economy can carry a bigger debt without strain. In July, that share came in at 94.1%, a little better than the official forecaster expected. But in the same report, the amount the government actually borrowed that month came in worse than expected. Both things are true at once because they come from different parts of the sum: the economy was recently measured as slightly bigger than first thought, which makes the debt look smaller by comparison, even though the pounds borrowed did not fall.

Deep Analysis
Root Causes

The ratio moved because its denominator moved, not because its numerator did. ONS incorporated the Q2 GDP first estimate, published 13 August, eight days before this bulletin, which revised earlier-quarter output upward; every debt-to-GDP figure for those quarters is recalculated against the new base the moment it lands, independent of anything the government spent or borrowed.

A second structural cause sits in the fiscal calendar itself. The OBR sets one forecast per fiscal event and profiles it monthly without interim revision, so every ONS bulletin between March and October is scored against a static baseline that cannot absorb news the baseline itself has not yet seen. That gap is what lets a single bulletin beat the forecast on one measure and miss it on another without contradiction.

What could happen next?
  • Meaning

    The debt-ratio improvement reflects a bigger measured economy, not reduced government borrowing.

    Immediate · Assessed
  • Precedent

    Both this reading and June's upward revision came from data updates rather than fiscal decisions, suggesting monthly moves in the ratio should be read cautiously until the OBR rebases its forecast.

    Short term · Suggested
  • Risk

    The £2.3bn borrowing overshoot against the OBR profile, if it persists monthly, would compound toward the October Budget without a forecast update to register it until then.

    Medium term · Suggested
Sources:Office for National Statistics
Mentions:Office for National Statistics →Office for Budget Responsibility →Economic and fiscal outlook →
First Reported In

Update #3 · Debt ratio fell; borrowing missed by £2.3bn

Office for National Statistics· 3 Sept 2026
Read original →
Causes and effects
Caused by
OBR fixes 28 October for next forecast
The OBR's confirmed 28 October forecast is what the ONS bulletin's March profile will next be replaced by.
Occurred 31 Jul 2026
Read story →
This Event
Debt beat the forecast, borrowing missed it
Britain's position is being scored against a forecast written on 3 March that does not refresh until the Budget on 28 October.
Led to
ONS puts borrowing £8.1bn over OBR path
July borrowing was £2.3bn over the OBR profile; the August release took the five-month overshoot to £8.1bn.
Occurred 22 Sept 2026
Read story →
Different Perspectives
Pension Protection Fund
Pension Protection Fund
Acting chief actuary Aaron Pang put the rise to 135.0% funded down to liabilities falling 2.1% against a 1.0% fall in assets, reflecting higher gilt yields. On Lowdown's reading, the yields that lift the Treasury's interest bill leave 4,838 company schemes with a £280.7bn surplus that does not reduce state borrowing.
Torsten Bell
Torsten Bell
The Labour figure wrote on 14 October that the IMF's October figures show the fastest fiscal consolidation in the G7. The IMF forecasts the UK deficit falling from 3.8% of GDP in 2026 to 1.4% in 2031, a squeeze still to be delivered through taxes and spending.
Tax Justice UK
Tax Justice UK
The left-leaning campaign group says ten tax reforms would raise over £60bn a year for public services, and on 22 October asked why higher taxes on extreme wealth remain politically difficult. It offers the tax-led exit to the IEA's cuts; the £60bn is its own claim, not an official costing.
Institute of Economic Affairs
Institute of Economic Affairs
The free-market think tank's Alternative Budget of 19 October would suspend the state pension triple lock for three years, freeze welfare in cash terms and move tax onto a wider VAT. It claims the day-to-day budget returns to surplus in 2027-28, its own projection rather than an official costing.
Resolution Foundation
Resolution Foundation
The living-standards think tank said welfare spending ran about £2.5bn above expectations in September, City AM reported on 21 October, and its economist Greg Thwaites urged targeted energy support. Its figure lands as a Chancellor who calls welfare cuts a moral duty finalises the 28 October Budget.
Institute for Fiscal Studies
Institute for Fiscal Studies
Director Helen Miller said a steady-as-she-goes Budget is not an option, with the IFS putting 2029-30 headroom at about £20bn, The Independent reported on 12 October. The IFS puts the cost of avoiding cuts and funding higher defence at around £35bn of tax rises or benefit cuts, more than any headroom estimate in circulation.

Written with AI from Lowdown's published reporting. Not individually reviewed by an editor. Editorial standards.