Surprise boost for Burnham as UK borrowing FELL last month but costs are on the rise – what it means for your money

THE UK’s borrowing fell last month in a surprise boost for new Prime Minister Andy Burnham. Public sector borrowing fell by a third in June compared with a year earlier. Borrowing is when a government spends more money than it collects in taxes and other revenues. It came in at £16billion last month, with the lower-than-expected figure driven by a drop in inflation-linked debt interest costs. Sign up for the Money newsletter Thank you! The Government’s official watchdog, the Office for Budget Responsibility (OBR), had predicted it at £16.3billion. A significant chunk of British Government debt is tied to inflation and with lower inflation rates than last year, it means the Treasury faces smaller interest payments on its existing bonds. However, Britain still faces eye-watering levels of debt with the amount borrowed in the financial year to June still well above where it was estimated to be. It was the 10th highest April to June period for borrowing since monthly records began in 1993. The interest on borrowing has also risen sharply since 2021 because of high inflation during the cost of living crisis. Borrowing costs lifted higher and the value of the pound weakened yesterday. Most read in Money Financial markets had remained relatively steady as Mr Burnham officially became the next Prime Minister, but they took a downturn in the afternoon after he told reporters he would use “any flexibility” he could find within existing fiscal rules. It pushed the interest on borrowing up, to the highest level for around two months. Meanwhile, the value of the pound slipped by 0.29% to 1.341 against the US dollar, having been positive throughout most of the day’s trading. It means Mr Burnham and his new Chancellor John Healey are coming into power just as Britain’s economy is on a knife-edge. Mr Healey was a surprise pick for Chancellor after reports suggested Shabana Mahmood and Ed Miliband were the frontrunners. Because there was still £16billion of borrowing in June, total public debt has crept upward rather than falling. They will also be dealing with high levels of unemployment, with new stats out today revealing the rate remained unchanged at 4.9% in the three months to May. Comment now