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May’s borrowing figure was higher than the OBR’s forecast
The UK borrowed £23.3bn in May, according to official figures, up almost a third on the same month last year.
May’s borrowing figure — the difference between spending and income from taxes — was £5.6bn higher than forecast by the Office for Budget Responsibility (OBR), the independent fiscal watchdog.
“The big picture is that the public finances are fragile,” said Capital Economics deputy chief UK economist Ruth Gregory. She said this would constrain whoever is Prime Minister.
“Spending on debt interest, public services, investment and benefits all increased in May 2026, compared with last May,” ONS statistician Tom Davies said.
This outweighed higher tax receipts, he added.
The OBR forecast was made in March, at which point the impact of the war in the Middle East had not yet become clear.
The Office for National Statistics (ONS) said interest payable on government debt jumped to £11.7bn – the highest ever recorded in any May.
Danni Hewson, head of financial analysis at AJ Bell, said that much of the jump in borrowing costs was the result of higher inflation.
Inflation jumped when the Iran conflict broke out and is expected to rise further due to the knock-on effects of higher oil prices.
Hewson said: “Long-term borrowing costs have been creeping up and will be monitored closely if the anticipated Labour leadership contest gets under way.
“Burnham has drafted in economic heavyweights to help shore up his credentials and has pledged to follow the existing fiscal rules, which includes not borrowing to fund day-to-day spending.”
Susannah Streeter, chief investment strategist at Wealth Club, said investors seem to have priced in the likelihood of a Labour leadership challenge.
“For now, that may be because Andy Burnham has promised to be more cautious about spending by largely sticking to fiscal rules.
“His pledge to bring down huge welfare costs, partly to fund higher defence spending, is a signal that he is positioning himself closer to the political centre, which may be providing some reassurance.”
On Thursday, the Bank of England opted to hold interest rates, in an attempt to balance a sluggish jobs market and widespread expectations that inflation will rise further in the coming months.
Chief Secretary to the Treasury Lucy Rigby said: “The war in the Middle East has clearly had an impact on economies around the world.
“We have the right economic plan to deal with these challenges — protecting families and businesses from rising costs, while cutting borrowing at a faster rate than any other G7 economy.”
Shadow Chancellor Mel Stride said: “Borrowing is out of control.”
“The Conservatives are the only party with a plan to balance the books by getting spending under control, especially the welfare bill.”
Separate official figures showed that retail spending rose by 1.2% in May, helped by unseasonably good weather.
Retailers said sales of outdoor furniture and fans were higher for the month due to the weather conditions and promotions.
