Chancellor given £2bn Budget boost after VAT error sees borrowing revised down

Chancellor Rachel Reeves has been given an extra £2 billion wriggle room in her upcoming Budget after it was revealed that official Government borrowing figures have been overstated due to inaccurate data on VAT receipts.

The Office for National Statistics (ONS) admitted that borrowing for the current financial year to August was £81.8 billion, down from the £83.8 billion previously reported.

It said the change was made after it was alerted to the errors in VAT receipt figures supplied by HM Revenue & Customs (HMRC), which were used to calculate the Government borrowing statistics published on September 19.

The ONS also said the errors meant that borrowing figures for 2024-25 were £1 billion lower than first thought.

Estimates were reduced by between £200 million and £500 million per month, the ONS added.

While a welcome boost for Ms Reeves ahead of her November Budget, financial year-to-date borrowing is still far higher than the £72.4 billion forecast by the UK’s fiscal watchdog, the Office for Budget Responsibility (OBR).

James Benford, director-general for surveys and economic and social statistics at the ONS, said: “The error reflected an omission by HMRC of some payment streams from the data used to estimate VAT receipts.

“It is difficult for the ONS to set up a mechanism to independently check these external inputs.”

But it marks the latest blunder with official statistics, with the ONS having admitted it overestimated inflation data for April and had to put back the release of monthly retail sales figures in August due to data errors.

The ONS is also struggling to overhaul its figures for the jobs market, with a long-awaited revamp of its labour force survey taking longer than expected and leaving economists – including the Bank of England – with an incomplete picture of UK employment.