Government borrowing in the UK surged last month, reaching the second-highest June level since records began in 1993, driven by soaring debt interest payments and increased public spending.
According to official data from the Office for National Statistics (ONS), borrowing in June totalled £20.684 billion—exceeded only by June 2020, during the height of the COVID-19 pandemic when the furlough scheme was in full force.
The figure was nearly £4 billion higher than economists had forecast in a Reuters poll, and over £6 billion more than the same month last year.
The sharp rise was mainly attributed to a significant increase in debt interest payments, the second-highest June figure since records on debt servicing began in 1997, alongside ongoing pressures on public services.
Despite the spike, total borrowing for the year so far remains broadly in line with projections from the Office for Budget Responsibility (OBR), published in March. However, June marks the second consecutive month in which borrowing has overshot those forecasts.
This presents a challenge for Chancellor Rachel Reeves, who has pledged to reduce public debt and restore fiscal balance by 2030 under her self-imposed economic rules. Analysts suggest she may be forced to raise taxes to cover the widening gap between government revenue and spending.
Pantheon Macroeconomics warned that “autumn tax hikes are likely and will probably be backloaded.”
Rob Wood, chief UK economist at Pantheon, estimated, “All told, we estimate that the chancellor’s £9.9bn of headroom has turned into a £13bn hole, meaning that Ms Reeves would need to raise taxes or cut spending by a little over £20bn in the autumn budget to restore her slim margin of headroom.”
He predicted that the government may target so-called “sin taxes” on items such as alcohol and tobacco, extend the freeze on income tax thresholds into 2029, and reintroduce restrictions on pension tax relief, including reinstating the lifetime allowance on pension pots.
Darren Jones, Chief Secretary to the Treasury and Rachel Reeves’s deputy, reiterated the government’s fiscal stance, stating, “We are committed to tough fiscal rules, so we do not borrow for day-to-day spending and get debt down as a share of our economy.”
“This commitment to economic stability means we can get on with investing in Britain’s renewal.”
As the government prepares for the upcoming autumn budget, all eyes will be on how Reeves addresses the widening fiscal gap while honouring pledges to maintain financial discipline and boost investment.
