Government borrowing in June highest since 2015

Public sector net borrowing rose sharply in June because of higher debt interest payments and rising spending on services, figures show.

It totalled £7.2bn, according to the Office for National Statistics, up from £3.3bn in June 2018.

It was the highest June borrowing since 2015, the ONS said.

The government took in £800m more in tax and National Insurance contributions than a year previously, but debt repayments rose by £2.1bn.

The ONS said there was “a notable increase” in expenditure on goods and services of £1.2bn, while the UK’s contribution to the EU increased by £400m compared with June 2018.

In the three months to June, borrowing was 33% higher than the same period in 2018 at £17.9bn.

Public sector net debt rose to £1.81 trillion, or 83.1% of gross domestic product (GDP).

The latest figures, which show public spending running ahead of forecasts, come as concerns grow over the state of the UK economy in the run-up to Brexit.

The most recent GDP figures showed the economy grew by 0.3% in May after shrinking 0.4% in April.

But economists say that June’s growth figures will have to be strong to avoid contraction in the second quarter.

Spending boost ‘coming’

“As a share of GDP, cyclically-adjusted borrowing in 2019-20 probably will be only slightly below the 2% limit in 2020-21 set by the existing chancellor’s main fiscal rule,” said Samuel Tombs, chief UK economist at Pantheon Macroeconomics.

“His successor, however, looks highly likely to tear up the existing rules, setting the stage for a giveaway Budget in the autumn and for fiscal policy to materially boost GDP growth next year.

“The Conservatives are desperate to improve their poll rating and public support for austerity has crumbled, so a fiscal boost is coming.”

On Thursday, the Office for Budget Responsibility said borrowing could rise by £30bn a year in 2020-21 if the UK leaves the EU without a transition deal on 31 October.

The OBR was created in 2010 to give independent analysis of the UK’s public finances.

In its first assessment of the economic impact of a no-deal scenario, the OBR used IMF analysis that shows the UK economy could contract by 2% in 2020 before recovering in 2021.