UK government borrowing rises sharply, exceeding expectations as debt interest payments nearly doubled last month. Official figures show public sector borrowing hit £20.7 billion in June—£6.6 billion higher than the same period last year.
The Office for National Statistics (ONS) confirmed this as the second-highest June borrowing figure since records began in 1993. Only June 2020, during the pandemic, saw higher borrowing. Rising inflation pushed debt interest payments to £16.4 billion, up from £8.7 billion a year earlier.
UK government borrowing rises sharply due to higher spending on public services and weaker-than-expected tax revenues. National Insurance contributions increased in April, but income tax receipts fell short, reflecting a sluggish labour market.
Economists warn the trend could force tough decisions in the upcoming Autumn Budget. Dennis Tatarkov of KPMG UK said persistent economic challenges may require “further tax rises or spending cuts” to meet fiscal targets.
Chancellor Rachel Reeves faces mounting pressure as borrowing for the financial year’s first quarter reached £57.8 billion—£7.5 billion above 2024 levels. While this aligns with official forecasts, analysts suggest Reeves may need £15-25 billion in additional revenue to stabilize public finances.
Alex Kerr of Capital Economics noted, “The gilt market won’t tolerate much more borrowing,” implying tax hikes are likely. Meanwhile, Shadow Chancellor Mel Stride criticized the government for “spending money it doesn’t have,” citing £100 billion in annual debt interest costs.
The Treasury maintains its commitment to fiscal discipline. Chief Secretary Darren Jones emphasized avoiding borrowing for day-to-day spending and reducing debt relative to GDP. However, with economic growth weak—the UK contracted in April and May—the path to balance appears fraught.
UK government borrowing rises sharply, setting the stage for a contentious Budget. Will Reeves opt for austerity or higher taxes? As inflation-linked debt costs bite, the Chancellor’s choices will define this government’s economic legacy.
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