Overview
- The Office for National Statistics reported on Tuesday that public sector net borrowing fell to £16 billion in June, a drop of about £7.9 billion from a year earlier and helped by lower debt interest costs of £11.8 billion.
- The current budget deficit used to pay day-to-day spending was £11.8 billion in June, roughly £1.3 billion above the Office for Budget Responsibility’s forecast and a miss against the government’s fiscal rule that the current budget must be in surplus over a rolling three-year window.
- Borrowing in the financial year to date is £57.6 billion and public sector net debt stands at 94.9% of GDP, leaving the total stock of debt close to the £3 trillion mark and limiting room for new commitments.
- Prime Minister Andy Burnham and Chancellor John Healey say they will work together to protect fiscal credibility, but Healey faces immediate pressure to increase defence spending toward a reported 3% of GDP target and to find money for cost-of-living measures.
- Economists caution the improvement is fragile because lower interest costs partly reflect market moves and not structural change, so further spending or higher borrowing could push up financing costs and force sharper fiscal trade-offs; watch upcoming spending decisions and gilt market reactions.