Government borrowing jumps to ?7.2bn in June
By Sean Farrell
Date: Friday 19 Jul 2019
(Sharecast News) - Government borrowing rose unexpectedly sharply to £7.2bn in June - the highest level for that month in four years, official figures showed.
Public sector net borrowing excluding public sector banks increased by £3.8bn from June 2018 as the government paid more to borrow and increased public spending, the Office for National Statistics said.
The £7.2bn figure for June 2019 was the highest June borrowing since 2015 and was well ahead of economists' average forecast of £3.9bn. The government paid £2.1bn more in interest but excluding that volatile measure and extra EU payments the UK still borrowed £1.3bn more than a year earlier.
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said the underlying figures were "not pretty" and suggested the economy was flagging.
In the first three months of the current financial year, borrowing increased by £4.5bn to £17.9bn from a year earlier. The figures showed public spending running ahead of the official forecast in the run-up to Brexit with a new prime minister and chancellor due to take office.
Both candidates to replace Theresa May as prime minister have proposed higher public spending and tax cuts. Experts have said both Boris Johnson and Jeremy Hunt's proposals would blow a hole in established targets for deficit reduction.
The Office for Budget Responsibility has forecast a rise in public borrowing in the current year to 1.3% of GDP from a 16-year low of 1.1% of GDP in 2018-19. But the OBR said on 18 July that public borrowing could surge by £30bn a year or more if the UK leaves the EU without a deal on 31 October.
Johnson, firm favourite to become the next Conservative leader and prime minister, is expected to replace Philip Hammond as chancellor when he takes over. Hammond has warned against discarding fiscal discipline and said a no-deal Brexit would scupper spending plans.
Pantheon's Tombs said: [Hammond's] successor ... 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."
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