Key facts
- The current budget deficit exceeded forecasts on Chancellor John Healey's first day.
- June's borrowing for public sector spending was £11.8bn, £1.3bn over OBR estimates.
- Total government borrowing for the financial year is £57.6bn.
- Public sector debt is 94.9% of GDP, approaching £3 trillion.
- Debt interest costs in June reached £11.8bn, the fourth highest on record for the month.
New UK Chancellor John Healey is immediately confronted with the country's strained public finances, as official data released on Tuesday revealed a key fiscal target has been missed. The current budget deficit, a critical metric for fiscal rules, exceeded forecasts set by the Office for Budget Responsibility (OBR).
The Office for National Statistics (ONS) reported that borrowing for day-to-day public sector spending in June amounted to £11.8bn, approximately £1.3bn higher than the OBR's projection. Healey's government is bound by fiscal rules requiring the current budget to be in surplus over a rolling three-year period.
While monthly government borrowing was slightly below expectations at £16bn, the total borrowing for the current financial year has now reached £57.6bn. Public sector debt has also increased compared to the previous year, standing at 94.9% of GDP, and is now just over £10bn away from the £3 trillion mark.
These figures underscore the difficult fiscal landscape Healey inherits, with pressures from defence spending and demands for cost-of-living relief from figures like Burnham. Notably, debt interest costs hit £11.8bn in June, the fourth highest on record for the month, attributed to volatility in bond markets as traders priced in potential increased government borrowing under a Burnham administration.
Healey, who previously resigned as defence secretary over funding issues, is widely expected to prioritize an increase in defence spending. He faces potential criticism if he fails to meet the commitment to raise defence spending to three percent of GDP by 2030. Additional pressures include potential tax easing for low-income workers and funding plans to gain more control over utility companies.
Healey stated his commitment to meeting fiscal rules with a buffer against uncertainty and making life more affordable for working people. He emphasized fiscal control and credibility as foundational for economic stability and national security, particularly in a more dangerous global environment.
Shadow Chancellor Sir Mel Stride criticized the figures, stating Labour had "maxed out the nation's credit card." Economist Martin Beck highlighted the challenge of preventing borrowing financing costs from escalating, noting the political pressure to fund new commitments versus the fiscal need to maintain a buffer against economic shocks.