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Chancellor Rachel Reeves' headroom shrinks as government borrowing soars

Feb 18, 2026

Chancellor Rachel Reeves is facing a tightening fiscal space as government borrowing in February surpassed the Office for Budget Responsibility's (OBR) forecast, according to the latest figures. Reeves has consistently emphasised the importance of fiscal responsibility within the government's economic strategy, as reported by City AM. However, data from the Office for National Statistics (ONS) indicates that her financial leeway may be narrower than anticipated. The gap between revenue and expenditure hit £10.7bn in February, outstripping the OBR's earlier prediction of £6.5bn. Looking at the fiscal year up to February, the deficit reached £132.2bn, marking an increase of £14.7bn compared to the same period last year. At the close of February, the provisional ratio of net government debt to GDP was pegged at 95.5%. These statistics are likely to cause concern for Reeves as she prepares for the Spring Statement next week. In the upcoming Statement, the Chancellor is expected to announce significant changes to public spending to align with the government's new commitments to military funding. The government has dismissed the possibility of tax increases. Chief Secretary to the Treasury Darren Jones has suggested that the forthcoming Statement will address the issue of the inactive workforce. "We must go further and faster to create an agile and productive state that works for people," stated Jones. "That's why we're refocusing the public sector on our missions and, for the first time in 17 years, going through every penny of taxpayer money line by line, to make sure it is helping us secure Britain's future through the Plan for Change." KPMG economist Dennis Tatarkov said the data "raised the risk" of the Chancellor missing targets. "There may not be much room for the Chancellor to defer major tax and spending decisions to the Autumn Budget. "Borrowing in February was some £4.2bn more than the OBR's October prediction, and more bad news came in the revisions to past data, with January's surplus revised down by £2.1bn.