UK (Parliament Politics Magazine) – UK borrowing hit £20.2bn in April, beating forecasts and sparking concerns over Labour’s fiscal plans as Reeves faces scrutiny before key spending review.
The UK’s higher-than-expected April borrowing highlights the pressure on Rachel Reeves to improve public services and boost growth within tight fiscal limits.
What did ONS say about April’s £20.2bn borrowing spike?
The Office for National Statistics revealed that UK borrowing rose to £20.2bn in April, intensifying pressure on Labour’s fiscal stance. This marks a £1bn increase from April 2024 and is the fourth-highest April total since records began in 1993. Forecasts from City analysts projected borrowing at £17.9bn.
The new financial year opened with April’s borrowing figures released. These come after employment tax increases announced by Rachel Reeves in the autumn budget.
The ONS lowered its borrowing estimate for 2024-25 by £3.7bn. Last year’s total borrowing reached £137.3bn, surpassing the Office for Budget Responsibility’s prediction by £11bn.
The OBR warned that annual payments on the national debt may exceed £100 billion for the rest of this Parliament, adding significant pressure on public finances.
What did Rob Doody say about April’s borrowing surge?
Rob Doody, the ONS deputy director for public sector finances, stated,
“Receipts were up last April, thanks partly to the higher rate of national insurance contributions. However, this was outweighed by greater spending, due to rising public services’ running costs and increases in many benefits and state pensions.”
He added,
“At £1 billion higher than the same time last year, this April’s borrowing was the fourth highest for the start of the financial year since monthly records began more than 30 years ago.”
What did the OBR warn about UK GDP and debt risks?
The Office for Budget Responsibility warned that Britain’s economy could contract by as much as 1% in the worst-case scenario. This would eliminate the fiscal margin available to Ms Reeves.
According to the latest data, the UK’s public sector net debt stands at 95.5% of GDP, one of the highest levels since the 1960s. This total includes all annual borrowing combined.
What did Professor Joe Nellis say about the Chancellor’s fiscal rules?
MHA’s economic expert, Professor Joe Nellis, advised that the Chancellor must scrap her fiscal guidelines to prioritize economic expansion.
He stated,
“Public sector spending has continued to significantly exceed income in April, leading to a spending deficit covered by borrowing of £20.2bn. This is an increase on the £16.4bn recorded in April and is a concerning figure for the Chancellor as it continues to put strain on her slim fiscal headroom.”
Mr Nellis warned,
“Low growth results in lower tax revenues and lower Government income, making it almost impossible for the Chancellor to balance public spending and revenue without growth-inhibiting tax raids. Of the Government’s two economic goals — cutting the deficit and creating a growing economy — they must prioritise growth.”
He added,
“To do this, the Chancellor should scrap her fiscal rules to enable public and corporate investment and focus on recalibrating the economy onto a positive path to growth.”
What challenges did the Chancellor face before the 2029 spending review?
Ahead of the upcoming spending review, the chancellor faces increasing pressure over her firm control of government finances, which will set departmental budgets through 2029.
It was revealed on 21 May that Deputy Prime Minister Angela Rayner urged Ms Reeves to consider new wealth taxes in the recent spring statement to boost revenue and avoid harsh welfare cuts.
Ms Reeves will struggle to control public finances as Britain’s economy faces turbulence amid growing uncertainty caused by Donald Trump’s global trade conflict.