Government Borrowing: Less Than Expected in June

The government borrowed less than expected in June, helped by higher tax receipts and a big drop in debt interest payments. Borrowing, the difference between spending and tax income, fell to £18.5bn, according to the Office for National Statistics (ONS).

The BBC is reporting that this is £400m lower than last June and below predictions by the government’s independent forecaster. But the ONS said borrowing is still the third highest for June on record.

The Office for Budget Responsibility (OBR) had expected public borrowing to reach £21.1bn.

Meanwhile, the ONS said that borrowing for April and May had been revised down by £7bn.

Ruth Gregory, deputy chief UK economist at Capital Economics, said that Chancellor Jeremy Hunt “now looks likely to have a little more wiggle room in the Autumn Statement to fund a few pre-election giveaways”. But she added: “With the full upward impact on borrowing from higher interest rates and weaker GDP growth still coming down the line, we continue to think any package of pre-election net tax cuts will probably need to be modest or swiftly reversed.”

Mr Hunt said it was important to “avoid reckless spending. Now more than ever we need to maintain discipline with the public finances,” he said.

The ONS said that the interest paid on government debt hit £12.5bn, below a record £20bn in June last year but still historically high.

Some of the interest that the government pays on its debt is linked to the Retail Prices Index measure of inflation which remains stubbornly high despite a slowdown in June.

The Bank of England has also been raising its key interest rate since December 2021 to curb rising prices.

Tax receipts were stronger than expected in June, at £77.4bn. This was higher than the OBR forecast and £5.6bn more than the same month last year.

Overall, public sector net borrowing between April and June reached £54.4bn – £12.2bn ahead of the comparable period in 2022 but less than the £61.9bn forecast by the OBR.

Figures from the ONS on Friday showed that retail sales rose by 0.7% last month.

Department stores and furniture retailers said demand was boosted by good weather and summer discounts.

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