On 22 September 2026 the Office for National Statistics (ONS) reported a provisional deficit in the public finances for the month of August 2026 of £18.3bn, £2.9bn more than in August 2025 and £3.5bn overbudget. The year-to-date provisional deficit of £77bn was £2bn less than a year previously, but still £8bn overbudget.

Henning Diederichs, ICAEW Director for the Public and Not-for-Profit Sectors, said: “Today’s numbers show that the deficit for August was higher than expected, with a triple whammy of geopolitical uncertainty, persistent inflation and rising gilt yields squeezing the public purse.

“While borrowing for the five months to August was lower than a year ago, it was £8bn over budget. With limited headroom it remains challenging for the Chancellor to both increase public spending significantly and stay within the government’s existing fiscal rules.

“Though geopolitical events are outside the Chancellor’s control, the budget is an opportunity for him to take charge where he can,” continued Diederichs. “We’re urging him to take this opportunity to bring clarity to the fiscal headroom available and stabilise the public finances to avoid market surprises, reduce pressure on future generations and help reduce debt interest costs.” 

Month of August 2026

The monthly deficit of £18.3bn consisted of: 

• a current budget deficit of £12.4bn, which was £1.8bn higher than in August 2025 and £2.0bn more than budgeted; and 
• net investment of £5.9bn, which was £1.2bn higher than a year previously and £1.5bn more than was budgeted. 

Receipts of £99.0bn were £1.9bn less than the £100.9bn monthly average for the previous 12 months (excluding January 2026, the main self-assessment month). Meanwhile, current spending of £111.4bn was £3.4bn higher than the £108.0bn monthly average for the previous 12 months (including January 2026).  

Net investment of £5.9bn was £0.2bn below the £6.1bn 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 net cash inflows from working capital movements and lending activities during the month to result in a £4bn increase in net debt from £2,982bn on 31 July to £2,986bn on 31 August 2026. 

Year-to-date

The cumulative deficit for the first five months of the financial year of £77bn was £2bn lower than a year previously, as set out in Table 1. Receipts were £506bn for the five months from April to August 2026 (up £25bn or 5% from the same period a year ago), while current spending including depreciation totalled £558bn (up £22bn or 4%) and net investment was £25bn (up £1bn or 4%). 

The year-to-date deficit was £8bn over budget, comprising an adverse variance on the current budget deficit of £5bn and an overrun of £3bn on net investment. 

On the tax side of the equation, income tax and national insurance receipts both 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, while the £1bn reduction in debt interest was driven by a £4bn swing in the uplift on inflation-linked debt (down from £20bn to £16bn) offsetting a £3bn increase in the balance of debt interest (from £43bn to £46bn).

Net investment in the first five months was up by £1bn to £25bn:

• a £3bn increase in gross capital formation (ie, capital expenditure) to £41bn; and 
• a £1bn decrease in capital grants (including research and development and irrecoverable student loans) to £15bn; offset by
• a £1bn increase in depreciation to £31bn. 

Borrowing and debt 

Table 2 summarises how the government borrowed a total of £69bn in the first five months of the financial year to take public sector net debt to a provisional £2,986bn on 31 August 2026. This comprised public sector net borrowing (PSNB) to fund the deficit of £77bn less cash inflows of £10bn from working capital movements and lending activities. 

The ratio of public sector net debt to GDP increased by 0.5 percentage points from 93.3% of GDP at the start of the financial year to a provisional 93.8% on 31 August 2026 after adjusting 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 31 August 2026 of £2,986bn comprised gross debt of £3,551bn less cash and other liquid financial assets of £565bn.

Public sector net financial liabilities (PSNFL or ‘persnuffle’) of £2,620bn was equal to net debt of £2,986bn plus £713bn in other financial liabilities less £1,079bn in illiquid financial assets. Meanwhile, negative public sector net worth of £722bn 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 August 2026 release, the ONS revised the previously reported deficit in the first four months of the financial year up by £2.3bn but revised public sector net debt on 31 July 2026 down by £3bn to £2,982bn. 

The ONS also revised the deficit for the year ended 31 March 2026 up by £4bn to £134bn. 

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