UK Budget Logs Second Biggest June Deficit On Record

The UK budget logged its second biggest deficit for the month of June on record, as high inflation pushed up the debt servicing cost of government, the Office for National Statistics said Thursday.

Public sector net borrowing excluding public sector banks increased by GBP 4.1 billion to GBP 22.9 billion in June, which was the second-highest June borrowing since monthly records began in 1993.

This was GBP 0.6 billion more borrowing than the Office for Budget Responsibility had forecast.

The interest payable on central government debt increased by GBP 10.3 billion from the previous monthly record set in June 2021, to GBP 19.4 billion. The rising cost of debt servicing is largely a result of higher inflation, with the interest payable on index-linked gilts rising in line with the retail prices index.

June’s public finances figures provided more evidence that the government’s fiscal position is worse than the OBR predicted back in March, Capital Economics economist Ruth Gregory said.

This may limit the ability of the next Prime Minister to provide more relief for households when a further rise in CPI inflation from 9.4 percent in June to around 12 percent in October worsens the cost of living crisis, the economist noted.

In the financial year to June, the budget deficit fell by GBP 5.7 billion from the last year to GBP 55.4 billion.

Public sector net debt excluding public sector banks was GBP 2,387.6 billion at the end of June, or around 96.1 percent of gross domestic product.

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