UK public sector borrowing unexpectedly falls
Public sector borrowing unexpectedly fell in June, official data showed on Friday, although it remains at record levels.
According to the Office for National Statistics, public sector net borrowing excluding public sector banks (PSNB ex) was £18.5bn in June, down £0.4bn on the same month a year previously.
It remains the third-highest June borrowing since records began in 1993. However, the figure was below both consensus, for £22bn, and the Office for Budget Responsibility’s forecast of £21.1bn.
The ONS said tax receipts had been higher year-on-year, and that there had been a “substantial” fall in debt interest payable. However, benefit payments and costs related to inflation and the cost of living rose.
Central government receipts were £77.4bn, an increase of £5.6bn on June 2022. Of that, £57.3bn were tax receipts, a £4.6bn rise.
Total central government expenditure in June was £96.7bn, a £5.2bn jump and £2.3bn higher than the OBR’s forecast.
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said: “Good news on recent levels of public borrowing will not be celebrated much at the Treasury, given that the outlook for debt interest payments has deteriorated substantially since the budget.
“Full-year borrowing will total £116bn in 2023/24 – well below the OBR’s £132bn forecast – if the trend relative to the OBR’s forecast in the first three months of this year is maintained. So far, so good.
“Nonetheless, we continue to think that the chancellor will not have to scope to cut taxes meaningfully before the next general election.”
Martin Beck, chief economic advisor to the EY Item Club, said: “[We] think borrowing is likely to be higher than the OBR anticipates over the rest of the financial year.
“The likelihood that GDP and inflation will be stronger than the OBR expects is positive for tax revenues. But this will probably be more than offset by upward pressures on spending. Higher inflation combined with higher short and long-term interest rates will significantly increase the level of debt interest payments.”
Jeremy Hunt, the chancellor, said: “Now more than ever we need to maintain discipline with the public finances. We are at a crucial juncture and need to avoid reckless spending.”