MediumIV Macro Policy & Sovereign Debt21 October 2026, Wednesday
UK public debt tops £3 trillion for the first time
ONS figures show public sector net borrowing of £24.5 billion in September, £1.9 billion above the OBR forecast. Debt interest rose 16.6% to £10.9 billion, and net debt reached £3,005 billion.
The Office for National Statistics (ONS) published September's public finances on 21 October. Public sector net borrowing came in at £24.5 billion: £1.8 billion more than in September 2025 and £1.9 billion above the Office for Budget Responsibility (OBR) forecast. The median expectation in a Reuters poll was £23.85 billion. Net debt stood at £3,005 billion at the end of September, breaking the £3 trillion mark for the first time; as a share of GDP it was 94.0%, 0.7 points lower than a year earlier.
Interest is what widened the gap. Central government debt interest reached £10.9 billion in September, up 16.6% on the year and £2.0 billion above the OBR forecast. Of that, £4.0 billion came from the uplift in principal on index-linked gilts, which track the retail prices index (RPI). According to the Reuters report carried by Global Banking and Finance, interest costs for April–September rose by about 4% to £60.8 billion.
Borrowing in the first six months of the fiscal year totalled £97.8 billion: £4.4 billion less than a year earlier but £6.0 billion above the OBR forecast. Chancellor John Healey presents his first budget on 28 October, the same day the OBR publishes new forecasts. Capital Economics read the data as reinforcing expectations of a cautious budget; according to the report, a higher tax on banks is on the table.
Talay assessment
Bottom line
Britain's debt ratio is falling, but its interest bill is growing faster than forecast. In September £2.0 billion of the overshoot came from interest, and £4.0 billion from index-linked gilts. Energy-driven inflation feeds straight back into the budget through inflation-linked debt. A cautious budget on 28 October is the most likely path; the £6.0 billion overshoot in the first half keeps tax rises on the agenda.
Likely effects
- BudgetNegativeWeeks
Borrowing £6.0 billion above the OBR forecast in the first half leaves no room for new spending in the 28 October budget and brings tax rises to the fore.
- Index-linked debtNegative1–6 months
The £4.0 billion RPI-driven uplift in principal shows the interest bill grows automatically as inflation rises; energy prices hit the public finances through this channel.
- Gilt supplyNegative1–6 months
A deficit above forecast raises the risk of an upward revision to the 2026/27 remit; yields on longer-dated gilts stay sensitive to that risk.
Possibilities, ranked
- 1Cautious budget, limited tax60%
Healey presents a package with a small net effect on 28 October and leaves the hard choices for next year.
Watch: The headroom against the fiscal rule in the OBR's 28 October report
- 2Broad tax package30%
If the headroom erodes, broad-based tax rises follow, going beyond a levy on banks.
Watch: The total value of revenue-raising measures in the budget
- 3Extra borrowing10%
The government covers the gap with debt and the issuance programme grows markedly.
Watch: The 2026/27 gilt remit announced alongside the 28 October budget
Probabilities are calibrated judgement based on the sources, not measurement, and are revised as new information arrives. Not investment advice.
Market reaction
Indicators affected
- September borrowing▲ £24.5bn
- September debt interest▲ £10.9bn
- Public sector net debt▲ £3,005bn
- Net debt / GDP▼ 94.0%