LONDON (Reuters) -Britain’s government borrowed a lot more than expected in June, according to official data published on Friday that highlighted the budget challenges facing the new government of Prime Minister Keir Starmer.
Public sector net borrowing, excluding state-controlled banks, was a larger-than-expected 14.5 billion pounds ($18.75 billion) last month. A Reuters poll of economists had pointed to an increase of 11.5 billion pounds .
Dennis Tatarkov, Senior Economist at KPMG UK, said the data showed “the daunting task” for the new government of funding its agenda without worsening the public finances.
“A combination of high levels of spending and weak growth prospects will present uncomfortable choices – deciding between even more borrowing or substantially raising taxes if spending levels are to be maintained,” he said.
New finance minister Rachel Reeves is likely to announce her first budget after the summer recess of parliament. She and Starmer have ruled out increases in the rates of income tax, corporation tax and value-added tax, leaving her little room for manoeuvre to improve public services and boost investment.
The borrowing figure for June was 2.9 billion pounds higher than expected by Britain’s budget watchdog whose forecasts underpin the tax and spending plans of British governments.
In the first three months of the financial year which began in April, borrowing was 3.2 billion pounds higher than projected by the Office for Budget Responsibility.
The Office for National Statistics said June’s borrowing was the lowest for the month since 2019.
But the deficit was made bigger by a 1.2 billion-pound fall in social security contributions compared with June 2023. They were cut by former Prime Minister Rishi Sunak before the July 4 election that swept Starmer’s Labour Party to power.
($1 = 0.7732 pounds)
(Reporting by William SchombergEditing by Sarah Young)
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