Rachel Reeves, the Chancellor, is gearing up to cut down on public spending to tackle the issue of increased borrowing. Public borrowing has exceeded expectations following a significant borrowing spree in February, setting the stage for a challenging Spring Statement for Reeves.

The Treasury has borrowed £132.2 billion this financial year, surpassing the Office for Budget Responsibility's (OBR) forecast by £20.4 billion. This borrowing amount ranks as the third-highest in 11 months since records began in 1993, falling behind only the borrowing during the Covid pandemic and post-global financial crisis.

The OBR's projected borrowing for the whole financial year is already surpassed, with one more month remaining in the fiscal year. Lower tax revenue and higher spending, particularly on social benefits, have propelled the increased borrowing. February witnessed a public sector net borrowing of £10.7 billion, marking the fourth-highest figure for that month since records began.

As the Chancellor readies to trim Whitehall spending in the Spring Statement, Reeves faces the challenge of meeting fiscal rules amid the OBR's updated economic forecasts. Economists anticipate that rising borrowing costs have exhausted most, if not all, of the financial margin Reeves had allowed to adhere to her borrowing rules.

The economic growth is slower than anticipated following Reeves's unexpected tax increase, leading to a downgrade in projected growth rates for 2025-26. The OBR's forecasts do not incorporate the latest ONS borrowing statistics, indicating potential disparities due to the rapidly evolving financial landscape.

The OBR's February financial data period reflects a comparatively calm market situation, with gilt yields seeing fluctuations. Although the forthcoming forecasts may benefit from the favorable timing, they could quickly become outdated post-publication due to changing financial conditions.