UK Public Sector Borrowing Rises to £17.7bn in May, Exceeding Forecasts

Strategic Insights -

Rising public sector borrowing has raised concerns about the UK government's ability to meet strict spending rules, with Higher tax receipts unable to offset the increase. The public sector net borrowing gap widened to £17.7 billion in May, up from £17 billion a year earlier, and the second-highest on record. Despite the introduction of extra taxes on businesses, the chancellor Rachel Reeves emphasized the need to keep day-to-day Whitehall budgets within strict limits. The measure of shortfall in day-to-day spending, known as the current budget deficit, remained below the forecast by the Office for Budget Responsibility (OBR).

Key Takeaways:

  • The UK public sector net borrowing rose to £17.7 billion in May, exceeding the forecast of £17.1 billion.
  • This represents the second-highest borrowing figure for the month on record, with only two other months (April 2020 and April 2021) recording higher borrowing.
  • The OBR expected the current deficit to be £13 billion in May, but it was £12.8 billion, the second consecutive month where the deficit fell below the forecast.
  • The chancellor Rachel Reeves has introduced extra taxes on businesses, including a rise in national insurance contributions, which were implemented in April.
  • The current budget deficit remains below the forecast by the Office for Budget Responsibility (OBR).
  • Backbench Labour MPs are expected to rebel against cuts to benefits worth more than £5 billion in the welfare bill introduced to parliament on Wednesday.
  • Major economic forecasters, including the International Monetary Fund and the Bank of England, have downgraded the UK's growth prospects this year, potentially reducing tax receipts over the longer term.

Statistics:

  • £17.7 billion: the public sector net borrowing figure for May, up from £17 billion a year earlier.
  • £17.1 billion: the forecast public sector net borrowing for May.
  • £13 billion: the OBR's expected current deficit in May.
  • £12.8 billion: the actual current deficit in May.
  • £5 billion: the amount of cuts to benefits worth that backbench Labour MPs are expected to rebel against.
  • £152 billion: the expected borrowing for 2024-25 according to the OBR.
  • £117.7 billion: the expected borrowing for 2025-26, a reduction of £34.3 billion from the previous year.

Sources:

  • "UK public sector net borrowing rises to £17.7bn in May", Phillip Inman, The Guardian
  • "UK debt: £2 trillion and rising", BBC News
  • "Budget 2023: Chancellor Rachel Reeves presents plans to reduce UK debt", BBC News
  • "Office for Budget Responsibility (OBR) - latest news and updates", OBR website
  • "International Monetary Fund (IMF) - UK economic forecast", IMF website
  • "Bank of England - UK economic forecast", Bank of England website