UK Borrowing Falls Below Forecast as Public Finances Show Modest Improvement

The Treasury’s spending watchdog has some cautiously good news about the state of Britain’s books. The Office for Budget Responsibility announced today that revisions to official data have brought forecast public sector net borrowing in 2025-26 slightly below its previous projections.

The Numbers Behind the Improvement

The actual figures tell a story of gradual fiscal recovery. Government borrowing for the financial year ending March 2026 reached £132.0 billion, according to the Office for National Statistics. That’s equivalent to 4.3% of GDP – and it’s £0.7 billion lower than the OBR’s own forecast of £132.7 billion.

But there’s a bigger picture here. Borrowing in 2025-26 dropped by £19.8 billion compared to the previous year – a big 13.1% reduction. The ONS confirms this represents the lowest borrowing as a share of GDP since March 2020, before the pandemic sent public spending soaring.

The improvement wasn’t uniform across all areas of government. Local government borrowing actually came in higher than expected, contributing to March 2026’s monthly borrowing figure overshooting the OBR’s forecast by £2.1 billion.

What the Forecasters Expected

The OBR’s track record on these predictions shows just how volatile public finances can be. Back in November 2025, the watchdog projected borrowing of 4.5% of GDP for 2025-26. That forecast itself was £21 billion higher than what they’d predicted just eight months earlier in March 2025. The OBR’s latest Economic and Fiscal Outlook maintains an optimistic trajectory. They project borrowing will continue falling from over 5% of GDP in 2024-25 to just 1.6% by 2030-31 – assuming current policies hold and the economy performs as expected.

Why Local Government Matters

The higher-than-expected local authority borrowing – around £18 billion for the year – reflects pressures that councils across England know all too well. Adult social care, children’s services, and temporary accommodation costs continue to strain local budgets.

This pattern affects Kent’s councils directly, as they manage similar financial pressures as trying to maintain essential services.

Key Takeaways

• Government borrowing in 2025-26 was £132.0 billion, £0.7 billion below the OBR’s forecast
• Annual borrowing fell by 13.1% compared to 2024-25, reaching the lowest level as a share of GDP since before the pandemic
• Local government borrowing exceeded expectations, highlighting ongoing pressures on council finances

What This Means for Kent Residents

The modest improvement in national borrowing provides some breathing room for future government decisions, though the £0.7 billion difference represents less than 1% of total borrowing. Kent households shouldn’t expect immediate changes to taxes or public spending based on this small variance, but sustained improvements could reduce pressure for future tax rises or spending cuts. Local residents should monitor how Kent County Council and Medway Council manage their own borrowing and budget pressures, above all given the national trend of higher-than-expected local government borrowing that reflects ongoing challenges in funding social care and essential services.