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News | Published July 20 2019

Net public sector borrowing hit five-year high in June

Higher debt interest payments and increased spending on services saw government borrowing hit £7.2 billion in June 2019, the highest level since 2015.

The figures, published by the Office for National Statistics, also reveal a £3.3 billion increase in public borrowing compared to June of 2018.

In June 2019, tax and National Insurance contributions saw the government take in a further £800 million compared to 2018, but its debt repayments have gone up by £2.1 billion.

Expenditure on goods and services has also gone up by £1.2 billion alongside an increase to the UK’s contribution to the EU.

The UK contribution to the bloc has seen a £400 million increase compared to last year, to the anger of Brexiteers.

Furthermore, borrowing reached a total £17.9 billion in the three months to June 2019, an increase of 33 per cent compared with the same period in 2018.

This saw net debt for the public sector hike up to 83.1 per cent of UK GDP, equivalent to £1.81 trillion.

The Office for Budget Responsibility has also revealed that borrowing could rise by an additional £30 billion a year in 2020-21 should the UK leave the EU without a deal, alongside a two per cent economic shrink over 2020 which should recover the following year.

The figures show that public spending is running ahead of scheduled predictions which will only invite increased uncertainty around the UK economy in the run-up to the Brexit deadline, exacerbated by the upcoming change of prime minister.

Although the economy yielded growth of 0.3 per cent in May after a 0.4 per cent dip in April, economists believe that it must grow well over June to avoid decline over the second quarter of the year.

Chief UK economist at Pantheon Macroeconomics, Samuel Tombs, believes that current regulations surrounding borrowing are set for an overhaul by Philip Hammond's successor as Chancellor.

This will come as the incoming government seeks tangible growth in UK GDP and an end to austerity.

Tombs said: "His 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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Authored by

Scott Challinor
Business Editor
@theparlreview
July 20 2019

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