UK borrowing increased more than expected in May as spending surged
The Government posted a larger-than-expected budget deficit last month, after a jump in spending.
The budget deficit widened to £5.1 billion in May, £1 billion higher than the same month last year, the Office for National Statistics (ONS) revealed on Friday.
Borrowing over the first two months of the financial year increased to £11.9 billion, representing an 18% increase on the same period in 2018.
The ONS said it now expects the Government to borrow more money this year than previously forecast.
It said it now predicts borrowing to rise to £24 billion for the financial year, £500 million higher than previously expected, and above Chancellor Philip Hammond’s £22.8 billion target.
The ONS also confirmed that borrowing for April was £1 billion higher than previously announced, at £6.8 billion.
Government spending rose by £2.5 billion during May, outpacing the £1.9 billion increase in receipts.
The Government received more money from residents as income tax revenues increased by £600 million and National Insurance brought in an extra £700 million.
VAT receipts rose by £500 million, but corporation tax income declined by 0.8%, its first annual fall in May since 2013.
The figures also revealed that public sector debt rose by £25 billion to £1.8 trillion in May.
As a proportion of GDP, the debt shrank by 1.4 percentage points to 82.9%.
Howard Archer, chief economic adviser at EY Item Club, said: “On the basis of April and May, the deficit is headed for £28.3 billion – but it is far too early to draw any conclusions as monthly public finance data can be prone to significant revisions as well as being influenced by specific factors.
“Much will depend on whether the economy can shrug off its current weakness as well as on Brexit developments.”
Mike Jakeman, PwC senior economist, said: “The latest figures on government borrowing confirm that the public finances have been returned to relative health by the years of austerity.
“Given that the budget deficit is estimated at around 1% of GDP in 2018/19 and interest rates remain very low, we do not consider a mild increase in borrowing to pose any risk to the health of the Government’s finances.”