UK Public Sector Borrowing Falls to £132bn, Beating Government Forecast

Government borrowing fell sharply in the financial year ending March 2026, dropping to £132 billion according to new figures from the Office for National Statistics.

The borrowing total represents a £19.8 billion decrease from the previous year’s revised figure of £151.8 billion. More considerably for Treasury planners, it came in £0.7 billion below the Office for Budget Responsibility’s forecast.

The Numbers Behind the Drop

Public sector net borrowing excluding banks — the key measure that strips out financial sector distortions — painted a picture of improving government finances through most of 2025.

Borrowing for the 11 months to February 2026 totalled £125.9 billion, down £11.9 billion from the same period the previous year. That represented 4.1 per cent of GDP.

But February’s monthly figure of £14.3 billion was £2.2 billion higher than February 2025, suggesting the improvement may be levelling off.

Why the Forecast Beat Matters

The Office for Budget Responsibility had predicted borrowing of £132.7 billion for the full financial year. Coming in below that target, even by a modest £0.7 billion, signals either better revenue collection or tighter spending control than expected.

Treasury officials will likely point to the year-on-year improvement as evidence of fiscal discipline. The £19.8 billion reduction represents a significant shift in the government’s financial position.

Yet economists have warned that early 2026 saw a £21 billion overspend compared to projections, highlighting ongoing pressures on public finances despite the annual improvement.

The Institute for Fiscal Studies has noted that while this year’s borrowing figures show improvement, projected deficits for coming years remain higher. Long-term debt concerns persist despite the current relief.

Office for National Statistics data showed that provisional estimates for the previous year were revised down following updated information from central government departments and local authorities.

The borrowing measure excludes public sector banks to provide a clearer picture of underlying government finances, stripping out the volatile effects of financial sector interventions.

Key Takeaways

• Government borrowing fell £19.8 billion to £132 billion in the year to March 2026
• The figure beat Office for Budget Responsibility forecasts by £0.7 billion
• Monthly borrowing in February 2026 rose compared to the previous February, suggesting the improvement may be slowing

What This Means for Kent Residents

Lower national borrowing reduces pressure on funding allocations to Kent County Council and district councils, potentially helping stabilise local budgets amid rising demands for services like social care and road maintenance. While no Kent-specific data was released in this update, sustained improvements in government finances could support continued funding for local infrastructure without immediate pressure for council tax rises. Residents should monitor their council’s budget announcements in coming months, as central government grants remain a key component of local authority funding that directly affects services from libraries to waste collection.