Source: Sharecast
Borrowing jumped £6.6bn year on year to £20.7bn, well above forecasts of £16.5bn, add more pressure on embattled Finance Minister Rachel Reeves to find cuts in public spending or raise taxes.
It is the second-highest June borrowing since monthly records began in 1993, beaten only by June 2020 amid the height of the Covid-19 pandemic when government spending soared to prop up the economy, said the Office for National Statistics.
Interest payable on government debt jumped to £16.4bn, a rise of £8.4bn compared with June 2024 and higher than the £14bn forecast by the Office for Budget Responsibility.
"Blowing past borrowing expectations is becoming the norm, and that fact that borrowing is surging compared to a year ago, could be seen as a sign that the government has lost control of the UK’s public sector finances. However, it cannot all be blamed on Rachel Reeves," said Kathleen Brooks, research director at XTB.
"The ONS blamed the increase in borrowing on the rising costs of providing public sector services, this includes pay rises given to public sector workers in the past year. It also said that the cost of servicing our debts rose significantly last month, as the interest paid on index-linked gilts helped to push up overall spending."
"Index-linked gilts could be a problem for some time to come, as the UK’s inflation figures are the strongest in the G13. For example, the UK’s inflation rate is currently 3.6% YoY, this compares to 2% in Germany and 1% in France."
"The inflation differential is playing havoc with the UK’s public finances, at a time when financial markets are starting to keep a close eye on high levels of government borrowing. This is likely to lead to even more speculation that taxes will rise in the October Budget, for the second time under Labour."
Reporting by Frank Prenesti for Sharecast.com