Government borrowing rises more than expected in June

Public sector net borrowing rose more than expected in June as inflation meant the government was forced to pay more interest on its debt, according to data from the Office for National Statistics.

Borrowing in April to June was up £1.9bn from the same period a year ago to £22.8bn. Meanwhile, borrowing in June rose by £2bn to £6.9bn compared to the same month last year, above consensus expectations of £4.2bn.

The ONS said it expects borrowing to come in at £58.3bm in the financial year ending March 2018.

Public sector net debt, excluding both public sector banks and Bank of England, stood at £1.62trn at the end of June, equivalent to 80.9% of gross domestic product and up £41.9bn on June 2016.

Pantheon Macroeconomics said higher borrowing cast doubt on Chancellor Philip Hammond’s scope to ease austerity.

“Although spending rose in most areas, a £1.2bn increase in interest payments and £0.8bn rise in contributions to the EU’s budget, partly to correct for underpayments in previous years, were to blame for the particularly strong growth. None of these developments tell us anything about the underlying health of the economy.”