Overall net borrowing (PSNB) was £13.73 billion, a larger deficit than July's upwardly revised £3.10 billion and even further above the £9.54 billion recorded a year ago. Excluding public sector banks (PSNB-X), the red ink stood at £13.73 billion, a larger deficit than July's £3.10 billion and last year's £10.47 billion. Both August readings were the highest for the month since 2021 and the third highest August reading ever. Note that the ONS has reclassified the NatWest Group plc from the public to the private sector, the change backdated to 1 June 2024. This reduces the PSNB to match the PSNB-X, the latter not impacted as it excludes public sector banks.

Total public sector spending was up £4.6 billion on the year as the effects of inflation more than offset a reduction in debt interest payments. Receipts were up £3.7 billion. Net debt was 100.0 percent of GDP, 4.3 percentage points higher than in August 2023 and roughly in line with the levels last seen in the early 1960s.

The August PSNB-X was £2.5 billion more than forecast by the Office for Budget Responsibility (OBR) and again underlines the fiscal problems facing the new Labour government. Today's update lifts the UK RPI to 6 and the RPI-P to minus 3, both measures showing that overall economic performance is roughly within market forecast.

The public sector net borrowing requirement (PSNB) is the difference between the sector's receipts and expenditure and so provides a simple measure of government fiscal policy. In response to the global economic crisis in 2008/09 the UK government introduced a number of measures designed to show the underlying state of public sector finances by omitting temporary distortions caused by financial interventions. It bases its fiscal policy on these measures. To this end, the underlying gauge of government borrowing watched most closely by financial markets is the PSNB-X which takes overall net borrowing (PSNB) but excludes public sector banks.

Changes in public sector finances can be used to determine the thrust of the government's fiscal policy. Generally speaking when the government has a rising deficit (or falling surplus) it is loosening its fiscal stance with a view to boosting economic activity. When its deficit is falling (or surplus rising), fiscal policy is being tightened in order to slow economic growth. However, sometimes changes in government financial positions can be due to factors outside of the government's control and do not signal an explicit shift in policy. This means that great care is needed in interpreting the data.