UK government borrowing in June was slightly lower than expected, providing a modest easing for a budget that remains fragile as new prime minister Andy Burnham outlines measures to ease living costs for households. Official figures show borrowing, the gap between spending and tax receipts, at £16bn in June, about £7. 9bn lower than a year earlier, but analysts warned that the public finances still face significant challenges.
Separate data indicated the unemployment rate was unchanged, with the Office for National Statistics (ONS) describing the labour market as "relatively steady". Yet the debt stock remains near £3 trillion, close to the annual size of the UK economy, underscoring the scale of the fiscal task ahead. The June borrowing figure came in just under the £16.
3bn predicted by the Office for Budget Responsibility (OBR), the government's forecaster. \n\nRuth Gregory, deputy chief UK economist at Capital Economics, called June’s outturn a "rare piece of good news" for Burnham and his Chancellor, John Healey, but cautioned that the public finances remain fragile with limited room for extra borrowing. So far in the current financial year, total borrowing reached £57.
6bn, according to the ONS, down £3. 7bn from the same period a year ago but £2. 7bn above the OBR’s forecast.
\n\nEconomists warned that borrowing still ran ahead of projections, a point made by James Smith, ING’s chief UK economist, who described the trend as a reminder of the challenges facing the new administration ahead of the autumn Budget. He indicated a difficult policy picture with tough choices to come. Burnham and Healey have pledged to follow Labour’s fiscal rules on spending and borrowing, though Burnham suggested he would use flexibility within those rules to pursue policy changes.
\n\nMarket reactions included a spike in the yield on 10-year gilts, briefly rising above 5% after Burnham’s remarks, before easing back to around 5. 01% as trading began on Tuesday. Healey emphasised in a statement that "fiscal credibility is the bedrock for economic stability and for national security".
\n\nThe government’s first major policy move in this administration was to cut VAT on electricity bills from 5% to zero from October, funded by savings from the cancellation of the digital ID programme. Labour criticised the plan as an unfunded tax cut, arguing the fiscal stance needed more clarity. On the debt front, debt interest payments totaled £11.
8bn in June, nearly a third lower than a year earlier but still the fourth-highest June tally on record, according to the ONS. \n\nOverall, while June’s borrowing undershot expectations, the public finances face ongoing pressure from servicing existing debt and elevated receipts volatility, underscoring the need for durable fiscal consolidation and credible policy amidst a challenging macro backdrop.
