The UK borrowed £23.3bn in May, up almost a third on the same month last year and £5.6bn more than the Office for Budget Responsibility forecast — a sign of what Capital Economics deputy chief UK economist Ruth Gregory called "fragile" public finances that will constrain whoever is Prime Minister.
Interest payable on government debt jumped to £11.7bn, the highest ever recorded in any May, as the Iran conflict drove inflation higher. "Long-term borrowing costs have been creeping up," said Danni Hewson, head of financial analysis at AJ Bell, warning they will be monitored closely if the anticipated Labour leadership contest gets under way after Andy Burnham was elected MP for Makerfield.
“UK borrowing hit £23.3bn in May, £5.6bn above forecast, as Asda losses grew to almost £1bn.”
Burnham has pledged to follow existing fiscal rules and not borrow to fund day-to-day spending, a signal that has reassured investors, according to Susannah Streeter, chief investment strategist at Wealth Club. But Shadow Chancellor Mel Stride said: "Borrowing is out of control."
The Bank of England held interest rates on Thursday, balancing a sluggish jobs market against expectations of further inflation. Chief Secretary to the Treasury Lucy Rigby blamed the war in the Middle East, saying the government has "the right economic plan".
Asda slumped deeper into the red last year, with losses growing to almost £1bn. Its accounts show the supermarket chain hit by the cost of price cuts to lure back shoppers and one-off costs as it fends off Aldi.