UK Borrowing Overshoots in Warning to New Burnham Government

Skip to Content News Archives Economy Energy Oil & Gas Renewables Electric Vehicles Mining Commodities Agriculture Real Estate Mortgages Mortgage Rates Finance Banking Insurance Fintech Cryptocurrency Work Wealth Smart Money Wealth Management Investor Personal Finance Family Finance Retirement Taxes High Net Worth FP Comment Executive Women Puzzmo Newsletters Financial Times Business Essentials More Innovation Information Technology FP500 Podcasts Small Business Lives Told Tails Told Shopping Financial Post Store Obituaries Place a Notice Advertising Advertising With Us Advertising Solutions Postmedia Ad Manager Sponsorship Requests Classifieds Place a Classifieds ad Working Profile Settings My Subscriptions Saved Articles My Offers Newsletters Customer Service FAQ News Economy Energy Mining Real Estate Finance Work Wealth Investor FP Comment Executive Women Puzzmo Newsletters Financial Times Business Essentials This advertisement has not loaded yet, but your article continues below.HomePMN BusinessUK Borrowing Overshoots in Warning to New Burnham GovernmentBritain borrowed more than forecast in the first three months of the fiscal year, a reminder to new Chancellor of the Exchequer John Healey of the challenges he faces to keep the public finances on track.Author of the article:Andrew Atkinson and Philip Aldrick You can save this article by registering for free here. Or sign-in if you have an account.John Healey in Downing Street on July 20. Photographer: Chris J. Ratcliffe/Bloomberg Photo by Chris J. Ratcliffe /Bloomberg(Bloomberg) — Britain borrowed more than forecast in the first three months of the fiscal year, a reminder to new Chancellor of the Exchequer John Healey of the challenges he faces to keep the public finances on track.THIS CONTENT IS RESERVED FOR SUBSCRIBERS ONLYSubscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman, and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.SUBSCRIBE TO UNLOCK MORE ARTICLESSubscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.REGISTER / SIGN IN TO UNLOCK MORE ARTICLESCreate an account or sign in to continue with your reading experience.Access articles from across Canada with one account.Share your thoughts and join the conversation in the comments.Enjoy additional articles per month.Get email updates from your favourite authors.THIS ARTICLE IS FREE TO READ REGISTER TO UNLOCK.Create an account or sign in to continue with your reading experience.Access articles from across Canada with one accountShare your thoughts and join the conversation in the commentsEnjoy additional articles per monthGet email updates from your favourite authorsSign In or Create an AccountThe budget deficit came in at £57.6 billion ($77.5 billion) between April and June — £2.7 billion more than the Office for Budget Responsibility forecast in March.The overshoot came despite an improvement in June that saw the deficit fall by almost £8 billion to £16 billion. The monthly shortfall was less than the £17.8 billion economists were forecasting, though the decline was largely driven by a sharp drop in debt costs that is not expected to be repeated. Revisions to April and May also helped curtail the cumulative deficit.Get the latest headlines, breaking news and columns.By signing up you consent to receive the above newsletter from Postmedia Network Inc.A welcome email is on its way. If you don't see it, please check your junk folder.The next issue of Top Stories will soon be in your inbox.We encountered an issue signing you up. Please try againHealey takes over a slow-growing economy that is struggling to generate the tax revenue needed to keep pace with rising spending on debt interest, public services, investment and welfare benefits. Prime Minister Andy Burnham’s surprise decision to pick Healey for chancellor has fueled speculation about a further boost for military spending and who will pay for it. Just six weeks ago, Healey resigned as defense secretary in a row over funding with the Treasury. However, the general assessment is that he represents a safe pair of hands who will stick to the UK’s fiscal rules. Healey was voted the second most investor-friendly option for chancellor in a Bloomberg survey of market participant clients behind former Health Secretary Wes Streeting. Although the figures from the Office for National Statistics underscored the scale of the challenge Healey faces, there were some promising signs. Borrowing in the first two months of the year was revised down by £4.8 billion and the June outturn alone was slightly better than the OBR forecast.A £5.3 billion fall in debt interest costs in June compared with last year drove the monthly improvement but there were also big increases in VAT, income tax and corporation tax receipts. Those were partially offset by a steep increase in welfare spending. “June’s borrowing figures are a welcome confidence boost for the new government, but they should not be mistaken for a turning point,” said Martin Beck, chief economist at WPI Strategy. “That offers the new chancellor some welcome breathing space after a difficult start to the financial year.”Revenue in the first three months was £2.4 billion higher than the OBR forecast. However, spending overshot by £3.6 billion.Healey inherits his predecessor Rachel Reeves’ fiscal rules and, on that basis, remains off track. Her main goal is to balance the current budget in 2029-30. It was £42 billion in deficit after the first three months, £1.3 billion above the OBR forecast. This advertisement has not loaded yet.This advertisement has not loaded yet, but your article continues below.“Fiscal control is the first duty of any Chancellor. It is mine,” Healey said in a statement He also promised “to meet the fiscal rules with a buffer against uncertainty” while making life “more affordable for working people right across the UK.”The ONS noted the “strong growth in tax receipts, particularly from income-related taxes and Value Added Tax in June 2026.”The improvement came before the introduction of the government’s Great British Summer Savings scheme, which temporarily reduced the VAT rate on certain family-focused activities and children’s meals to 5% from 20% between June 25 and September 1. The government estimates the giveaway will cost around £300 million. In one of his first policy announcements, Burnham said he would remove VAT from energy bills from October at a cost £850 million in the 2026-27 financial year. The government said the cost would be covered by the decision to scrap the digital ID scheme, saving £1.8 billion over three years.Burnham has sought to reassure financial markets that he can be trusted with the public finances by pledging to maintain his predecessor Keir Starmer’s commitment to borrow for investment only and bring down the burden of government debt. He has nonetheless hinted at a number of costly commitments including raising tax-free income tax allowances, and investors want to know how they’ll be funded. In a sign of how sensitive markets are to any sign of fiscal laxity, UK bonds plunged on Monday after Burnham said he’d seek “any flexibility” within the budget rules. A 2022 gilt meltdown triggered by then-Prime Minister Liz Truss’ unfunded tax cuts still casts a long shadow in the UK, where borrowing costs are the highest of any major economy and public debt is the equivalent of 95% of gross domestic product — around its highest since the early 1960s.(Adds details, comment from new chancellor)Notice for the Postmedia NetworkThis website uses cookies to personalize your content (including ads), and allows us to analyze our traffic. Read more about cookies here. By continuing to use our site, you agree to our Terms of Use and Privacy Policy.