UK borrowing rises more than expected, putting pressure on Rachel Reeves
Figures from the Office for National Statistics (ONS) show public sector net borrowing rose to £20.7bn. This was £6.6bn higher than the same month a year earlier and the second-highest June borrowing figure since monthly records began in 1993. City economists had forecast borrowing to increase to £16.5bn.
It comes as Reeves prepares for a tough autumn budget amid mounting speculation over the need for large tax rises to cover a multibillion-pound shortfall in the public finances after the government's high-stakes welfare U-turn earlier this month.
Ministers have warned of 'financial consequences' after the backtracking on disability benefits and winter fuel payments for pensioners, which will cost more than £6bn.
Alongside a sluggish economic outlook and possible downgrade in productivity forecasts from the Office for Budget Responsibility at the autumn budget, economists have warned Reeves could face a £30bn shortfall against her fiscal rules.
The UK economy shrank for two consecutive months in April and May, while unemployment and inflation have risen, as businesses and households come under pressure from tax rises, elevated borrowing costs, and global uncertainty amid Donald Trump's trade war.
Reeves has faced growing demands from Labour backbenchers, unions and the former party leader Neil Kinnock to consider introducing a wealth tax. However, the chancellor has so far sought to keep her options open while pushing to reassure business leaders that her priority remains driving up economic growth.
The Institute for Fiscal Studies said on Monday there was a 'strong case' for the chancellor to tweak her self-imposed rule, which requires day-to-day spending to be matched by receipts by the fifth year of official forecasts.
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Government and opposition alike must do much better
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an hour ago
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