April borrowing hits £24.3bn as inflation drives up benefits and pension costs
UK government borrowing hit £24.3bn in April, the second highest on record, as inflation drove up state pension costs and debt interest reached £10.3bn, raising concerns over fiscal rules and public spending priorities.
The government borrowed £24.3bn in April as inflation lifted pension costs and debt interest hit £10.3bn in a single month.
What the numbers say
April is usually one of the stronger months for the public finances. Tax receipts rise as the new financial year opens. This April, borrowing was still the second highest on record for the month, per Office for National Statistics data.
The Office for Budget Responsibility had forecast £23.3bn. The gap is not catastrophic, but it points to a structural problem: the government’s bills rise automatically with inflation in ways its income does not keep pace with.
The state pension cost more because the triple lock links annual increases to whichever is highest among inflation, earnings growth, and 2.5%. Inflation staying elevated means the pension bill stays elevated. That is not a surprise; it is the known consequence of a policy the government chose to keep.
The debt interest trap
Paying £10.3bn in debt interest in one month is the other half of the story. The gilt market has been jittery since last autumn, pushing up the yield on government bonds. Higher yields mean higher borrowing costs. The government does not control gilt yields; it manages them by trying to convince financial markets that it is a safe bet.
The IMF this week urged Britain to ‘stay the course’ on Chancellor Rachel Reeves’s plan to cut borrowing. That is the institution that helped impose structural adjustment on dozens of countries in the 1980s and 1990s speaking. When it offers reassurance, it is worth asking who exactly is being reassured.
The government’s fiscal rules require it to bring borrowing down as a share of the economy over a five-year period. One bad month does not break those rules. A series of them, at a time when the economy is growing slowly, does.
Who pays for this
The political logic of the Reeves position is that the rules protect the government from bond market panic. The practical consequence is that protecting the bond market means protecting spending on debt interest before spending on anything else.
In April, the government paid more to service its debt than it spent on many public services combined. That money does not fix a hospital waiting list. It does not insulate a home. It goes to the holders of UK government bonds: largely financial institutions, pension funds, and overseas investors.
The benefits bill is rising partly because people need benefits. Wages in many parts of the country have not recovered in real terms from the years of austerity and the inflation surge that followed. The government’s own policies have kept millions in a system that pays them too little to get off it.
The forecast problem
The OBR forecast that informed March’s Spring Statement was built on assumptions about growth, inflation, and interest rates. All three are now moving in directions that make the numbers harder to hit. Tariff turbulence from Washington has clouded the growth outlook. The gilt market has not fully settled. Inflation has come down from its peak but remains sticky in services.
Reeves has already used most of the headroom the OBR gave her. A further deterioration in any one of those three variables and the headroom is gone. At that point the choice is between breaking the fiscal rules, cutting public spending further, or raising taxes.
The people who will not be asked which they prefer are the ones who depend on public services to get through the week.
