Government borrowing jumps despite boost from national insurance hike
It followed the move by Rachel Reeves in April to increase NICs for employers, which has seen wage costs soar for firms across the UK as they also faced a rise in the minimum wage in the same month.
In spite of this, borrowing still surged to £17.7 billion last month, the second highest figure on record for May, surpassed only at the height of Covid.
Public sector net borrowing excluding public sector banks was £17.7 billion in May 2025. This was £0.7 billion more than in May 2024 and the second-highest May borrowing since monthly records began in 1993.
➡️ https://t.co/I4cI5aiUZ4 pic.twitter.com/LxKyTrmoh6
— Office for National Statistics (ONS) (@ONS) June 20, 2025
The ONS said May borrowing was £700 million higher than a year earlier, though it was slightly less than the £18 billion most economists had been expecting.
Borrowing for the first two months of the financial year to date was £37.7 billion, £1.6 billion more than the same two-month period in 2024.
Rob Doody, deputy director for public sector finances, said: 'Last month saw the public sector borrow £0.7 billion more than at the same time last year, with only 2020, affected as it was by Covid-19, seeing higher May borrowing in the time since monthly records began.
'While receipts were up, thanks partly to higher income tax revenue and national insurance contributions, spending was up more, affected by increased running costs and inflation-linked uplifts to many benefits.'
While May's borrowing out-turn was lower than economists were expecting, it was more than the £17.1 billion pencilled in by the UK's independent fiscal watchdog, the Office for Budget Responsibility (OBR) in March.
Public sector net financial liabilities excluding public sector banks were provisionally estimated at 83.9% of GDP at the end of May 2025. This was 2.5 percentage points more than at the end of April 2024, but 12.5 percentage points less than for public sector net debt. pic.twitter.com/wcjZOnXOTx
— Office for National Statistics (ONS) (@ONS) June 20, 2025
But the figures showed that central government tax receipts in May increased by £3.5 billion to £61.7 billion, while higher NICs saw social contributions rise by £1.8 billion to £15.1 billion last month alone.
Public sector net debt, excluding public sector banks, stood at £2.87 trillion at the end of May and was estimated at 96.4% of gross domestic product (GDP), which was 0.5 percentage points higher than a year earlier and remains at levels last seen in the early 1960s.
The ONS said the sale of NatWest, formerly Royal Bank of Scotland, cut net debt by £800 million last month, but did not have an impact on borrowing in the month.
Interest payments on debt, which is linked to inflation, fell £700 million to £7.6 million due to previous falls in the Retail Prices Index.
Interest payments depend on inflation from two months earlier.
But recent rises in RPI are expected to see debt interest payments race higher in June.
Thomas Pugh, economist at audit and consulting firm RSM UK, warned that despite the NICs increase, Ms Reeves is still likely to have to announce further tax increases in the autumn budget.
Commenting on today's public sector finances figures for May 2025, ONS Deputy Director for Public Sector Finances Rob Doody said: (quote 1 of 2) pic.twitter.com/A6p9MsvZcF
— Office for National Statistics (ONS) (@ONS) June 20, 2025
He said: 'The under-performance of the economy and higher borrowing costs mean the Chancellor may already have lost the £9.9 billion of fiscal headroom that she clawed back in March.
'Throw in the tough outlook for many Government departments announced in the spending review and U-turns on welfare spending and the Chancellor will probably have to announce some top-up tax increases after the summer.
'We are pencilling in tax increases of £10 billion to £20 billion.'
Darren Jones, chief secretary to the Treasury, insisted the Government had 'stabilised the economy and the public finances'.
'Since taking office, we have taken the right decisions to protect working people, begin repairing the NHS, and fix the foundations to rebuild Britain.'
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
The Independent
29 minutes ago
- The Independent
Government still reforming ‘utterly broken' welfare system
The Scottish Secretary has said the UK Government is still working to reform the 'utterly broken' welfare system, following the substantial concessions made in Parliament earlier this week. Ian Murray also said the Cabinet is in a 'resolved' mood following the tearful appearance of Chancellor Rachel Reeves in the House of Commons. Mr Murray, a former publican, visited Belhaven Brewery in East Lothian on Thursday – where he poured a pint which then had his face imprinted on the foam by a machine at the bar. Speaking almost a year on from Labour's general election win, Mr Murray said his party had achieved 'a lot', adding: 'We've had 30 Bills through Parliament, the most that have ever been passed in the history of a new government. 'We've given 200,000 Scots the biggest pay rise, we've been able to set up GB Energy, we've stabilised the economy.' On Tuesday, Sir Keir Starmer's Government was forced into a last-minute climbdown in order for welfare legislation to pass its first parliamentary hurdle. Ministers shelved plans to restrict eligibility for the personal independence payment (Pip), with any changes now only coming after a review of the benefit. These changes are expected to put pressure on other parts of the Government's finances. Mr Murray said 'everybody agrees' the welfare system needs reform and too many people are 'locked out of the workplace because of the way the welfare system works'. He said the Timms review would examine the Pip system and the Government is confident the 'journey' of reform would continue. Pressed on whether substantial parts of the reform had been dropped, he said: 'A thousand people a day are going into personal independence payments, that's 371,000 a year. 'That's completely unsustainable.' He added: 'This whole system is completely and utterly broken and it's unsustainable and that's what we're trying to resolve. 'The one thing that unites everybody in this debate is the fact they know the system is broken and it has to be reformed.' The Scottish Secretary was asked if the Chancellor's Budget choices would affect the devolved Scottish Government budget, with Mr Murray noting the Spending Review had given Edinburgh a further £9.1 billion over two years. He said: 'The Budget will be set in October as it is in any budget. 'Of course, with things fluctuating so quickly, we wouldn't speculate now what would happen then, because things can change so quickly. 'But we've already said there'd be no change to the Scottish Government's budget.' Mr Murray said the mood in Cabinet is 'one of resolve' following Ms Reeves' appearance in the Commons and markets had responded positively to the Prime Minister's show of support in her.
Reuters
an hour ago
- Reuters
Quality of UK economic data concerning, quick fix unlikely, say economists: Reuters poll
BENGALURU, July 3 (Reuters) - A clear majority of economists polled by Reuters are concerned about the quality of official British economic data, the backbone of monetary and fiscal policy decisions, and have doubts over how quickly they can be fixed. Facing criticism over unreliable economic data, Britain's Office for National Statistics announced measures last week to address the issue, including splitting its leadership structure and investing 10 million pounds ($14 million) over the next two years. But a Reuters poll published on Thursday showed reservations among analysts over how quickly the problems, primarily involving labour market data, can be fixed. The Labour Force Survey has seen a plunge in response rates since the COVID-19 pandemic, casting doubts over its results. The ONS also said last month that April consumer price inflation, which the Bank of England targets, was overstated by 0.1 percentage point. The British agency isn't alone. There are some concerns about the reliability of U.S. inflation data released by the Bureau of Labor Statistics as it faces a staffing crunch. The BoE, like other central banks, needs to be sure about inflationary pressures from the jobs market to set its policy. Governor Andrew Bailey recently described the data shortcomings as a "substantial" problem for policymakers. Inaccurate economic data also make it difficult for economists to produce forecasts, as historical data play a key role in that process. Nearly 85% of economists, 21 of 25, in a June 25-July 3 Reuters poll said they were concerned about the quality of official UK economic statistics, including 40%, or 10, who said they were very concerned. Only four said they were unconcerned. "Producing economic statistics is not an easy task, but the ONS has managed to let the quality slip of some fairly important statistics over the years," said James Rossiter, head of global macro strategy at TD Securities, one of the gilt-edged market makers (GEMMs) - primary dealers in UK government bonds. "The fact the agency was so slow to come to terms with the quality decline ... makes the institution's data less trustworthy than their peers in other developed economies." Rossiter said the big risk was that policymakers were left grappling with the true state of the economy against a volatile global backdrop. Worries about economic data could also hurt investor confidence, which is already low over erratic U.S. trade policies and ongoing geopolitical conflicts. Concerns have eased somewhat following the ONS's pledge to "restore quality and confidence" in its data, but a turnaround will take time. "There are clearly issues with UK labour market data which we are aware of and working with or around ... There isn't necessarily a quick fix here," said Cathal Kennedy, senior UK economist at RBC Capital Markets, also a GEMM. "The best way the ONS can rebuild confidence is to continue being transparent and open about the steps it is taking to improve its services. Some refocus on core/key areas is also likely to be beneficial." ($1 = 0.7320 pounds)
Scottish Sun
2 hours ago
- Scottish Sun
Beloved restaurant chain shuts ALL its locations in UK and ceases trading after two ‘unforgettable' decades
The company announced their sad closure in a message on Instagram KITCHEN CLOSED Beloved restaurant chain shuts ALL its locations in UK and ceases trading after two 'unforgettable' decades A POPULAR restaurant chain has shuttered ALL of its UK locations as it ceases trading after 20 years. Hungry customers were disappointed to learn one of their favourite dinner spots would be disappearing from the high street forever. 3 Beloved restaurant chain Ping Pong has closed all its UK locations Credit: Alamy 3 The company has struggled to stay afloat since the Covid pandemic Credit: Alamy Ping Pong was hailed for its range of more than 40 dim sum options and affordable prices. It was founded all the way back in 2005, by restaurateur Kurt Zdesar, and 13 venues quickly popped up within four years. Ping Pong's success continued to soar, and at it's height boasted 12 restaurants in London. The company announced their sad closure in a message on Instagram. "It's a wrap. After 20 unforgettable years, all Ping Pong locations are now permanently closed," they said. "We're incredibly proud of what we built, an independent hospitality brand full of creativity, flavour and soul. 'To everyone who joined us over the years, for dim sum dates, happy hours, bottomless brunches, and just-because catch-ups – thank you… It's been sum-thing truly special.' The move comes after the restaurant came under fire last year for changing its service charge to a 15 per cent discretionary 'brand charge'. Ping Pong also took a significant hit during the Covid pandemic, with trading losses of £1.4million in the year to March 2020. Within two years, their locations had halved in number, and the firm went to administrators in a desperate bid to save the brand. Famous fast-food chain dubbed 'Britain's rudest restaurant' to close final UK branch and teases future plans Begbies Traynor reported in 2022 the pandemic had caused 'significant disruption' to the business. This comes after an Italian restaurant chain faced the same fate and closed down all of its sites after nearly six years. Officina 00 was a popular pasta joint with three locations across Covent Garden, Fitzrovia and Old Street. It charged around £15 for posh pasta dishes such as curly pappardelle and killer bucatini. Owner Elia Sebregondi took to Instagram last week to share news that the business was no more. He said: "It is with a heavy heart that I share the news that Officina 00 restaurants have now permanently closed. "I have done everything in my power to overcome the many challenges faced in the last few months, but despite all efforts I have been forced to close down." The news left diners heartbroken with many describing it as a "big loss". Chains have been struggling recently as the cost of living has led to fewer people spending on eating out. Businesses have also been struggling to bounce back after the pandemic. As a result, a number of chains have been forced to close down or reduce their estate. Chick 'n' Sours has also closed its remaining restaurants in Haggerston and Seven Dials in London. And, the branch of a famous fast food chain is set to shut its doors after being "forced into liquidation" with £400k debt. The unique restaurant went viral back in 2022 with its performative staff being purposely rude to guests. Karen's diner on White Lion Street in London's Islington will close at the end of June after trading for two years. It's the restaurant's last remaining venue in the UK and is regularly described as one of the most memorable and bizarre dining experiences in the capital. With their deliberately rude waiters, Karen's has racked up millions of views on TikTok with clips of them insulting customers. Their website describes it as an "absurdly fun experience" where you are "greeted and waited upon by rude waiters and forced to play a variety of stupid games". How to save money eating out THERE are a number of ways that you can save money when eating out. Here's how: Discount codes - Check sites like Sun Vouchers or VoucherCodes for any discount codes you can use to get money off your order. Tastecard - This is a members club where you pay to have access to discounts worth up to 50 per cent off at thousands of restaurants. It costs £4.99 a month or £34.99 for the year. Loyalty schemes - Some restaurants will reward you with discounts or a free meal if you register with their loyalty scheme, such as Nando's where you can collect a stamp with every visit. Some chains like Pizza Express will send you discounts for special occasions, such as your birthday, if you sign up to their newsletter. Voucher schemes - Look out for voucher schemes offered by third party firms, such as Meerkat Meals. If you compare and buy a product through then you'll be rewarded with access to the discount scheme. You'll get 2 for 1 meals at certain restaurants through Sunday to Thursday. Student discounts - If you're in full-time education or a member of the National Students Union then you may be able to get a discount of up to 15 per cent off the bill. It's always worth asking before you place your order.
