UK government borrowing hit £20.2 billion in April, stoking fears of tax rises in the Autumn Budget.
The latest public sector finance figures show that borrowing in April was £1 billion higher than the same period of last year and the fourth-highest April borrowing figure since monthly records began in 1993.
While the updated estimate for borrowing across the full 2024/25 financial year has been downgraded £3.7 billion from last month’s initial estimate to £148.3 billion, it still overshoots the Office for Budget Responsibility’s forecast by £11 billion.
Meanwhile, the current budget deficit of £70.3 billion is also £9.6 billion more than forecast by the OBR.
Lindsay James, investment strategist at Quilter said the figures will do little to ease growing concerns around the sustainability of the UK’s fiscal position.
“Markets are already showing signs of unease. Ten-year gilts have edged higher in recent weeks as investors reassess the UK’s fiscal outlook against a backdrop of weak growth, persistent inflation and rising global debt burdens,” James said.
According to Quilter’s research, more than 70% of respondents expect tax rises to feature in the Autumn Budget, with 65% also anticipating spending cuts. A further 59% believe the Chancellor may be forced to alter the fiscal rules and nearly a quarter expect a change in leadership at the Treasury should growth continue to disappoint.
“The decision to hold off on tax rises in the Spring Budget increasingly looks like a temporary reprieve. As borrowing continues to outstrip forecasts and debt interest costs remain elevated, pressure is building on the Chancellor to make tougher choices. Without a material pickup in economic growth or productivity, modest tax increases and targeted spending restraint appear the most plausible route to maintain credibility with both markets and voters.
“The data shows that the Government remains on the back foot, constrained by self-imposed rules while juggling rising costs and tepid revenue growth. If borrowing continues to overshoot expectations, further fiscal tightening might be inevitable in the autumn, not because it is politically desirable but because the numbers leave little room for anything else,” James added.
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