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Official data reveals that the UK government’s borrowing in June was slightly less than anticipated, coinciding with new prime minister Andy Burnham’s initial efforts to implement measures aimed at easing household living expenses. The Office for National Statistics (ONS) reported that borrowing—which represents the gap between government spending and tax income—stood at £16 billion for the month. This figure is £7.9 billion lower than the borrowing recorded in June of the previous year.
The labour market, meanwhile, demonstrated stability, with unemployment rates holding steady between March and May, according to separate ONS figures. Despite the somewhat encouraging borrowing numbers, the ONS highlighted that the total national debt remains close to £3 trillion, an amount nearly equivalent to the UK’s entire annual economic output.
June’s borrowing was slightly beneath the £16.3 billion forecast by the Office for Budget Responsibility (OBR), the government’s official financial forecaster. Ruth Gregory, deputy chief UK economist at Capital Economics, described the lower-than-expected borrowing as “a rare piece of good news” for both Burnham and his new chancellor, John Healey. At the same time, she cautioned that “there is limited scope for extra borrowing” due to the fragile state of public finances.
For the current financial year so far, total borrowing has reached £57.6 billion. Although this is £3.7 billion less than the same timeframe in the previous year, it exceeds the OBR’s forecast by £2.7 billion. Both Burnham and Healey have committed to maintaining the fiscal rules set by former chancellor Rachel Reeves on spending and borrowing, with Burnham noting his intention to use any available “flexibility within them” to support policy initiatives. Healey underlined the importance of fiscal responsibility by stating, “fiscal credibility is the bedrock for economic stability and for national security.” Higher revenues from income tax and VAT, along with falling interest payments on inflation-linked debt, contributed to the relatively better borrowing figures.
Interest payments on government debt in June amounted to £11.8 billion, which, while nearly a third lower than the same month last year, still ranked as the fourth highest total for June on record, according to the ONS. Meanwhile, the labour market survey confirmed unemployment remained at 4.9%. Growth in regular earnings—excluding bonuses—held steady at 3.4% annually for the March to May period. However, wage growth in the private sector slowed to below 3% for the first time since 2020.
Yael Selfin, chief economist at KPMG, remarked that the “subdued” wage growth increases the likelihood that the Bank of England will keep interest rates unchanged at 3.75% at its upcoming meeting. She explained that “weak hiring activity is continuing to weigh on workers’ bargaining power, limiting upward pressure on wages.” Additionally, Selfin warned that households can expect renewed pressure on living standards in the latter half of the year as rising energy costs translate into higher bills
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