On 21 October 2026 the Office for National Statistics (ONS) reported a provisional deficit in the public finances for the month of September 2026 of £24.5bn, £1.8bn more than in the same month last year and £1.9bn more than budgeted.

This brought the provisional deficit for the six months to September 2026 to £98bn, £4bn less than a year previously, but £6bn over budget.

Henning Diederichs, ICAEW Director for the Public and Not-for-Profit Sectors, said: “National debt hit £3tn for the first time in September, with public spending over-budget in the first half of the financial year. The rising cost of borrowing and inflation mean that servicing the debt is a significant concern for the Chancellor as he prepares for his first Budget next week.

“Pressures are mounting to provide additional support for rising energy bills, but the fiscal challenges to balance spending are becoming more acute, particularly as John Healey has less headroom than in the spring forecast."

Diederichs explained that this is why the government needs to clarify the definition of current budget balance in the fiscal stability rule, given it is changing from a current budget surplus at this Budget.

He warned: “Ambiguity about what the new definition means for headroom could create a negative inflationary loop meaning further increases in borrowing costs and reduced investor confidence.” 

Month of September 2026

The monthly deficit of £24.5bn consisted of:

• a current budget deficit of £15.7bn (£0.9bn higher than in September 2025 and £1.2bn more than budgeted), and
• net investment of £8.8bn (£0.9bn more than a year previously and £0.7bn more than budgeted).

This reflected:

• Receipts of £99.3bn, which were £2.2bn less than the £101.5bn monthly average for the previous 12 months (excluding January 2026, the main self-assessment month).
• Current spending of £115.0bn, which was £6.6bn higher than the £108.4bn monthly average for the previous 12 months (including January 2026).
• Net investment of £8.8bn, which was £2.6bn higher than the £6.2bn monthly average for the past 12 months (excluding March 2026 with its end-of-year capital rush).

Borrowing to fund the deficit was offset by £0.7bn in net cash inflows from working capital movements and lending activities during the month. This resulted in a £24bn increase in net debt from £2,981bn on 31 August to £3,005bn on 30 September 2026.

Year-to-date

The cumulative deficit for the first half of the financial year of £98bn was £4bn lower than a year previously, as set out in Table 1.

Receipts were £609bn for the six months from April to September 2026 (up £34bn or 6% from the same period a year ago), while current spending, including depreciation, totalled £673bn (up £29bn or 5%) and net investment was £34bn (up £1bn or 3%).

The year-to-date deficit was £6bn over budget, comprising an adverse variance on the current budget deficit of £2bn and an overrun of £4bn on net investment.

On the tax side of the equation, income tax and national insurance receipts benefited from fiscal drag, while stronger corporate profits and anti-avoidance measures helped push up corporation tax receipts.

Meanwhile on spending, the rise in welfare costs reflected a 6.2% increase in the Universal Credit standard allowance and a 4.8% increase in the state pension from April 2026. At the same time, debt interest was up by £1bn with a £3bn swing in the uplift on inflation-linked debt (down from £23bn to £20bn) offset by a £4bn increase in the balance of debt interest (from £51bn to £55bn).

Net investment in the first six months was up by £1bn to £34bn:

• a £4bn increase in gross capital formation (ie, capital expenditure) to £51bn; and
• a £1bn decrease in capital grants (including research and development and irrecoverable student loans) to £20bn; offset by
• a £2bn increase in depreciation to £37bn.

Borrowing and debt 

Table 2 summarises how the government borrowed a total of £88bn in the first half of the financial year to take public sector net debt to a provisional £3,005bn on 30 September 2026.

This comprised public sector net borrowing (PSNB) to fund the deficit of £98bn, less cash inflows of £10bn from working capital movements and lending activities.

The ratio of public sector net debt to GDP increased by 0.8 percentage points from 93.2% of GDP at the start of the financial year to a provisional 94.0% on 30 September 2026. This reflects an adjustment for the increase in GDP (the denominator in the debt to GDP ratio) caused by inflation and economic growth, an effect known as debt being ‘inflated away’.

Public sector net debt on 30 September 2026 of £3,005bn comprised gross debt of £3,593bn less cash and other liquid financial assets of £588bn.

Public sector net financial liabilities (PSNFL or ‘persnuffle’) of £2,643bn was equal to net debt of £3,005bn, plus £714bn in other financial liabilities and less £1,076bn in illiquid financial assets.

Meanwhile, negative public sector net worth of £745bn was equal to PSNFL less £1,898bn in non-financial assets.

Revisions

Caution is needed with respect to the numbers published by the ONS, which are repeatedly revised as estimates are refined, gaps in the underlying data are filled and errors are identified.

This includes local government where the numbers are only updated quarterly in arrears and are based on budget or high-level estimates in the absence of monthly data collection.

In the September 2026 release, the ONS revised the previously reported deficit for the first five months of the financial year and public sector net debt on 31 August 2026 down by £4bn to £73.3bn and £2,981bn respectively. 

• For further information, read the public sector finances release for September 2026.