JULY 22 – UK authorities borrowing rose by greater than anticipated final month, including to the stress on the Chancellor, Rachel Reeves.
Borrowing – the distinction between public spending and tax earnings – was £20.7bn in June, up £6.6bn from the identical month final yr, the Office for National Statistics (ONS) stated.
Higher spending on public providers and debt curiosity funds outstripped income from different taxes, together with employers’ National Insurance contributions which was lifted in April, the ONS stated.
Analysts say it’s more and more seemingly that the chancellor must elevate taxes on the Budget within the autumn, after the federal government reversed cuts to advantages that had been aimed toward saving billions of kilos.
The newest borrowing determine was the second-highest June determine since month-to-month data started in 1993, the ONS added, behind solely June 2020, which was closely affected by the pandemic.
Dennis Tatarkov, senior economist at KPMG UK, stated the information “piles extra stress on public funds”.
“Furthermore, the longer-term outlook for public funds stays tough. Recent U-turns on welfare and protracted development headwinds might open a niche towards fiscal targets, which might require additional tax rises or spending cuts within the Autumn Budget.”
The ONS stated curiosity funds on authorities debt rose to £16.4bn in June 2025, which was almost double the quantity paid on the similar level final yr.
The improve is because of a pick-up within the fee of inflation, with curiosity funds on some authorities debt linked to the Retail Prices Index measure of inflation.
Borrowing within the first three months of the present monetary yr has now reached £57.8bn. While this is a rise of £7.5bn from the identical interval in 2024, it’s in keeping with what the Office for Budget Responsibility, the official impartial forecaster, had predicted.
Despite this, Alex Kerr, UK economist at Capital Economics, warned that “issues will in all probability worsen for the chancellor”.
“We assume that she might want to elevate £15-25bn on the Budget later this yr, with larger taxes doing a lot of the heavy lifting.”
Expectations are growing that Reeves must elevate taxes within the autumn to ensure that the federal government to fund its spending commitments, and final month she refused to rule out tax increases.
There has been hypothesis that the freeze on earnings tax thresholds, which is because of finish in 2028, could possibly be prolonged. The freeze implies that, over time, extra persons are dragged into paying larger tax charges.
The chancellor is following two important guidelines for presidency funds, which she has argued will convey stability to the UK financial system:
- day-to-day authorities prices shall be paid for by tax earnings, slightly than borrowing
- to get debt falling as a share of nationwide earnings by the tip of this parliament in 2029-30
Mr Kerr stated the most recent borrowing figures confirmed earnings tax income had been decrease than anticipated “which means that the current weak spot within the labour market is weighing on receipts”, and this might proceed “with underlying financial development nonetheless weak”.
The most up-to-date development figures have proven that the UK’s financial system contracted in both April and May.
Reacting to the most recent borrowing figures, Darren Jones, Chief Secretary to the Treasury, stated: “We are dedicated to powerful fiscal guidelines, so we don’t borrow for day-to-day spending and get debt down as a share of our financial system.”
Shadow chancellor Mel Stride stated: “Rachel Reeves is spending cash she doesn’t have. Debt curiosity already prices taxpayers £100bn a yr – virtually double the defence finances.”
By BBC
