UK public sector net borrowing was recorded at £22.8bn in June
UK public borrowing fell in June when compared to the same month a year ago, as the economic recovery allowed for reductions in spending and increased tax revenues.
The figure for public sector net borrowing was recorded at £22.8bn in June, down from £28.3bn for the same month in 2020, according to data from the Office for National statistics.
Despite the fall, the figure is the second-highest level recorded for June since records began.
As measures have been taken to support the economy during the pandemic, such as furlough payments, borrowing reached record highs.
However, the overall picture is less than pretty for the UK’s finances as rising inflation made an impact and interest payments on government debt rose by more than 200% to £8.7bn.
After the UK chancellor Rishi Sunak dealt with pandemic-induced issues by borrowing more money, his attention in the aftermath of the pandemic could now turn to the soaring levels of government debt.
On the whole, the amount the UK borrowed was below the expected £25.5bn predicted by the Office for Budget Responsibility (OBR) back in March.
Danni Hewson, AJ Bell financial analyst, comments on today’s public spending figures. Hewson argued that while the figures are proof that the lifting restrictions is powering the economy forward, it is not all good news.
“Government spending actually increased by £2.5bn in June compared to the June 2020 with falling furlough costs offset by spending on vaccines and the test and trace programme as well as interest payments on the debt pile. That figure of £8.7bn, up by a whopping £6bn from the same month last year, is the highest since records began in April 1997. It’s a timely reminder of the impact inflation can have with the hikes in interest down to gilts pegged to RPI increases,” said Hewson.
“It’s something that will certainly have the Chancellor taking a long look at his ledger as will the simple fact that though tax take has gone up, the country is still living considerably beyond its means. Going forward he’ll be under pressure to shake that magic money tree to find extra cash to help fuel the recovery particularly in areas like health and education. And if inflation runs hotter for longer than economists are predicting the money tree’s magic potion may have an unpalatable aftertaste.”