EL7.AI
Macro EconomyMedium•28 October 2026•
4 min read

£24.5 billion in September UK borrowing tests Healey’s budget

Key Facts

1Public sector borrowing was £24.5 billion in September 2026, up £1.8 billion and 7.7% year on year, exceeding the Office for Budget Responsibility’s forecast by £1.9 billion.
2Public sector net debt was £3,005.0 billion at the end of September 2026, equivalent to 94.0% of gross domestic product.
3A proposal requiring platforms to collect VAT could raise up to £1 billion.
4Reversing the cut in the surcharge on bank profits from 8% to 3% could raise more than £2 billion a year.
5The 2026 budget was scheduled to be presented to Parliament on October 28, 2026.

UK Chancellor John Healey was scheduled to present the 2026 budget to Parliament on October 28, as he faces pressure to fund possible tax relief for high street retailers while keeping the public finances in check. Before the presentation, Reuters reported, citing The Times, that the government plans to make e-commerce platforms responsible for collecting VAT owed by some traders selling through them. The report named Amazon, eBay and Temu among the platforms that could be covered by the measure. It also cited a separate possibility involving the surcharge on bank profits, without confirming that either proposal had been approved. This comes as September data showed government borrowing above the Office for Budget Responsibility’s forecast, making the funding of any tax cuts a central issue in the budget debate.

According to the report cited by Reuters from The Times, platforms would be required to collect tax at source from business sellers whose annual sales exceed £90,000. The proposal aims, according to the report, to pursue overseas sellers who avoid VAT by selling through platforms. The measure could raise up to £1 billion in revenue and help fund business rate cuts for retailers with physical premises. Shifting collection responsibility to the platform would potentially change how these sellers comply, while implementation details remain subject to what the government announces. The report does not present the move as an effective decision, but as a possible plan among the budget options.

In the banking sector, InvestingLive reported that one option under consideration is reversing the cut in the surcharge on bank profits from 8% to 3%. The change could raise more than £2 billion a year, according to the outlet’s estimate. In a separate report, Reuters said Healey had left the door open to raising the surcharge, which currently raises about £1 billion a year. That offers the government another tax option, but does not settle whether the budget will include an actual increase or what the rate would be. Reuters reported that the International Monetary Fund preferred reforming property taxes, broadening the sales tax base and improving the targeting of welfare spending before raising taxes on banks or workers.

The funding pressures are reflected in September figures published by the Office for National Statistics. Public sector borrowing was £24.5 billion, up £1.8 billion, or 7.7%, from September 2025, and exceeded the Office for Budget Responsibility’s forecast by £1.9 billion. Central government debt interest payable was £10.9 billion, up 16.6% year on year and £2 billion above forecast. In the financial year to September, borrowing reached £97.8 billion, £4.4 billion less than in the same period a year earlier but £6 billion above the office’s forecast. The comparison shows an annual improvement in cumulative borrowing alongside a gap against official estimates and a higher than expected interest burden.

Public sector net debt provisionally reached £3,005.0 billion at the end of September, equivalent to 94.0% of gross domestic product, according to the Office for National Statistics. This puts the debt level alongside the borrowing and debt interest figures facing the Treasury as it prepares the budget. Healey said his budget would be based on “fiscal discipline” and would “stick to the fiscal rules.” In its assessment of tax options, the International Monetary Fund presented property tax reform, broader sales taxes and better targeted welfare spending as options it preferred to raising taxes on banks or workers. These positions link the debate over securing additional revenue with decisions about its sources, as the government seeks to support high street retailers within its fiscal limits.

Ahead of the budget, sterling traded at 83.67 pence per euro on October 27, near the 83.63 pence level reached the previous week, its strongest since May 2025, according to Reuters. On financing, a Reuters poll showed the median expectation among bond dealers was for planned bond issuance in the 2026/27 financial year to rise by £3.4 billion to £249.6 billion after the budget. The poll forecast gross financing needs of about £334.3 billion in 2027/28, compared with the Office for Budget Responsibility’s March forecast of £307.6 billion. The head of the Institute for Fiscal Studies said the budget could pave the way for a difficult spending review next year, despite appearing relatively low stakes, Reuters reported. The next release of UK public finance data is scheduled for November 20, 2026, according to the Office for National Statistics.