UK Borrowing Surges as Debt Costs and Cuts Bite

UK government borrowing in June 2025 reached £20.7 billion, marking the second-highest June figure since records began and exceeding forecasts by billions. The Office for National Statistics reported that debt interest payments soared to £16.4 billion, nearly double last year’s figure, driven by inflation-indexed bond costs following an April inflation rise. The fiscal strain has been compounded by the scrapping of planned welfare cuts, intensifying speculation that Chancellor Rachel Reeves may introduce tax hikes in the autumn budget. Public sector borrowing for the first quarter of the fiscal year totaled £57.8 billion, up significantly from last year. Economists warn Reeves faces a potential £30 billion shortfall, with slow economic growth and political resistance to spending cuts complicating options. Reeves remains committed to balancing day-to-day spending with tax receipts by the end of the decade, though new revenue-raising measures may be necessary.