The impact of Iran war pressures on UK public finances has been laid bare as official figures showed Government borrowing lifted to a higher-than-expected \u00a323.3 billion last month after debt interest costs surged to a record May high.<\/p>\n
The Office for National Statistics (ONS) said borrowing rose by nearly a third (30.4%), or \u00a35.4 billion, compared with a year earlier and marked the second highest May on record, beaten only during the pandemic era.<\/p>\n
It was also more than the \u00a318.8 billion expected by most economists and the \u00a317.7 billion forecast by the UK\u2019s independent fiscal watchdog, the Office for Budget Responsibility (OBR).<\/p>\n
The ONS said interest payable on Government debt jumped \u00a34.1 billion to \u00a311.7 billion \u2013 the highest ever recorded in any May \u2013 as rising Retail Prices Index (RPI) inflation impacted index-linked Government bonds.<\/p>\n
Long-term Government borrowing costs have risen as the outlook for UK growth has weakened since the start of the Middle East conflict at the end of February and amid political uncertainty.<\/p>\n
It comes amid political upheaval as Prime Minister Sir Keir Starmer is set to see a threat to his leadership from Andy Burnham, mayor of Manchester, who last night secured a victory in the Makerfield by-election, paving the way for him to mount a challenge.<\/p>\n
Mr Burnham has recently sought to reassure financial markets, and bond markets in particular, by stating his support for the Chancellor\u2019s existing fiscal rules \u2013 which aim to pay for day-to-day spending out of tax revenues by the end of this decade.<\/p>\n
The latest borrowing figures highlight the scale of the challenge in sticking to the rules.<\/p>\n
Shadow Chancellor Sir Mel Stride said: \u201cBurnham claims he is committed to the fiscal rules, yet when asked he could not even say what they are.<\/p>\n
\u201cThe bond markets are watching nervously and we have already been paying a Burnham penalty on our borrowing costs.\u201d<\/p>\n
The ONS said borrowing in the financial year so far to May stood at \u00a346.3 billion, which is \u00a38.9 billion \u2013 nearly a quarter \u2013 more than the same period a year earlier and \u00a37.7 billion more than the forecast by the OBR.<\/p>\n
Tom Davies, ONS senior statistician, said: \u201cBorrowing in the first two months of the financial year was nearly \u00a39 billion higher than the same period of 2025.<\/p>\n
\u201cSpending on debt interest, public services, investment and benefits all increased in May 2026, compared with last May, more than outweighing higher tax receipts.<\/p>\n
Chief Secretary to the Treasury Lucy Rigby said: \u201cInflation has held steady and unemployment has fallen this week, but the war in the Middle East has clearly had an impact on economies around the world.<\/p>\n
\u201cWe have the right economic plan to deal with these challenges \u2013 protecting families and businesses from rising costs, while cutting borrowing at a faster rate than any other G7 economy.\u201d<\/p>\n
Matt Swannell, chief economic adviser to the Item Club, cautioned the Iran war impact will take its toll on the public finances, despite an initial peace deal having been signed by the US and Iran.<\/p>\n
He said: \u201cWith a ceasefire reached, energy prices have fallen back but are still higher than before the conflict.<\/p>\n
\u201cWeaker growth could weigh on tax revenues, while higher inflation and market interest rates will increase debt interest payments.\u201d<\/p>\n
He added: \u201cThe Government\u2019s primary fiscal rule commits it to ensuring that it\u2019s only borrowing to invest by 2029-2030.<\/p>\n
\u201cIn its spring forecast, the OBR estimated that this would be met by a healthy margin.<\/p>\n
\u201cBut several questions remain over whether the current plans will be sufficient to reduce public borrowing.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"The impact of Iran war pressures on UK public finances has been laid bare as official figures showed…\n","protected":false},"author":2,"featured_media":66271,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":"","_share_on_mastodon":"0"},"categories":[4],"tags":[7786,31078,31079,10755,16162,2609,8700,1312,10910,31080,5,6],"class_list":["post-66270","post","type-post","status-publish","format-standard","has-post-thumbnail","category-uk","tag-andy-burnham","tag-debt-interest","tag-debt-interest-costs","tag-government-bonds","tag-government-borrowing","tag-obr","tag-office-for-budget-responsibility","tag-office-for-national-statistics","tag-public-finances","tag-public-sector-banks","tag-uk","tag-united-kingdom"],"share_on_mastodon":{"url":"https:\/\/pubeurope.com\/@UnitedKingdom\/116775722882281241","error":""},"_links":{"self":[{"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/posts\/66270","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/comments?post=66270"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/posts\/66270\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/media\/66271"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/media?parent=66270"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/categories?post=66270"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/tags?post=66270"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}