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UK borrowing rises unexpectedly putting pressure on Chancellor

Public sector net borrowing reached £20.7 billion in June as pressure mounts for the upcoming budget.

July 22, 2025 at 06:06 AM

UK borrowing rises more than expected, putting pressure on Rachel Reeves

New borrowing figures increase uncertainty for Chancellor Rachel Reeves as budget preparations loom.

UK borrowing reaches alarming heights putting pressure on Rachel Reeves

The UK government's borrowing figures for June reveal a significant rise, reaching £20.7 billion. This amount surpasses predictions and marks the second highest June borrowing since records began in 1993. The Office for National Statistics reports that the increase in borrowing stems from rising public service costs and debt servicing. Interest on government debt has seen a sharp rise of £8.4 billion compared to the previous year. These developments put Chancellor Rachel Reeves in a difficult position as she prepares for an upcoming budget amidst suggestions for tax rises due to a forecasted fiscal shortfall.

Key Takeaways

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June borrowing hit £20.7 billion, exceeding predictions by £4.2 billion.

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This marks the second-highest borrowing figure for June since 1993.

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Interest on debt increased by £8.4 billion, reaching £16.4 billion.

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Heightened public spending and tax income struggles fueled borrowing surge.

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Speculation over tax rises enshrouds Chancellor Rachel Reeves as she prepares the budget.

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Pressure mounts from Labour backbenchers and financial institutions for fiscal adaptability.

"It’s forecast to rise to £130bn on Labour’s watch."

Shadow Chancellor Mel Stride warns of increasing debt interest burdens under Labour.

"This commitment to economic stability means we can get on with investing in Britain’s renewal."

Darren Jones emphasizes the government's focus on fiscal discipline while planning investments.

"Labour’s jobs tax and reckless borrowing is killing growth and fuelling inflation."

Stride criticizes Reeves for policies that are perceived as harmful to growth.

"There is a strong case for the chancellor to tweak her self-imposed rule."

The Institute for Fiscal Studies suggests reevaluating current fiscal guidelines to address pressing financial issues.

The spike in borrowing highlights a wider issue within the UK's financial landscape. As the government grapples with significant public spending and growing debt, the pressure mounts on Reeves to find solutions that appease both economic advisors and public sentiment. This scenario signals a challenging path ahead, particularly with impending discussions around taxation and fiscal policies. With competing demands from various stakeholders, Reeves must navigate a fine line between fiscal responsibility and maintaining economic growth, an increasingly daunting task in the current climate.

Highlights

Rising borrowing indicates troubling trends in UK finances.
Tax rises may be unavoidable as pressures mount on the budget.
Public spending demands clash with economic growth priorities.
This budget could define Reeves' future as Chancellor.

Financial risks linked to rising UK borrowing

The increase in public sector borrowing raises concerns about potential tax hikes and economic stability. Chancellor Rachel Reeves faces significant pressure as she prepares for a challenging autumn budget, with forecasts indicating a possible £30bn shortfall in finances. This could lead to backlash from various sectors regarding fiscal strategies.

As fiscal pressures continue, the choices made in the upcoming budget will have lasting consequences.

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uk borrowing chancellor budget economy politics economy

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