Government borrowing shot up to £20.7 billion last month highlighting the challenge facing Rachel Reeves in bringing the public finances back under control.
The worse than expected total was the highest deficit on record for June excluding the pandemic and £6.6 billion more than in June last year.
The scale of the borrowing, almost £700 million a day, makes it even more likely that the Chancellor will be forced into more tax rises in her second Budget in the Autumn.
The interest bill alone on central Government debt was £16.4 billion in June largely because of an increase in the rate of inflation.
About a quarter of Government debt is in the form of index linked gilts on which the interest rate rises and falls in line with the Retail Prices Index.
City forecasters had been expecting borrowing of around £17 billion in June
Government borrowing so far this financial year has reached £57.8 billion, up £7.5 billion on the same three month period in 2024. Only the April to June quarters of the pandemic years of 2020 and 2021 have seen higher borrowing.
The current budget deficit - borrowing to fund day-to-day public sector activities - was £16.3 billion in June. £7.1 billion more than in June 2024.
Total public sector net debt excluding public sector banks was estimated at 96.3% of GDP at the end of June 2025; up 0.5 percentage points more on June 2024.
Darren Jones, Chief Secretary to the Treasury, said: “We are committed to tough fiscal rules, so we do not borrow for day-to-day spending and get debt down as a share of our economy.
“This commitment to economic stability means we can get on with investing in Britain’s renewal, including fixing our NHS, strengthening our national defence and building hundreds of thousands of affordable homes through our Plan for Change.”
Alex Kerr, UK economist at forecasters Capital Economics said Rachel Reeves would probably be forced to raise between £15 and £25 billion in extra taxes in the Budget following U-turns on cutting disability benefits and pensioner winter fuel payments.
Professor Joe Nellis, economic adviser at accountancy firm MHA, said:” What we are very likely to see at the Budget is another set of tax rises. The freeze on income tax brackets will continue, effectively acting as a stealth tax on workers jumping tax brackets through inflation-level rather than real-terms pay rises.
“How else the Chancellor raises funds is unclear, especially if she is to maintain her fiscal rules and the pre-election promise to not raise taxes on ‘working people,’ although we have already seen a loosening of the meaning of that term.
“Whether tax hikes target wealth, pensions, business, or other areas, they will not be conducive to economic growth, disincentivising investment and innovation, and pushing some wealth creators to up sticks and leave the country.
“Ultimately, any tax rises that stifle growth could leave the economy in a similar position again, creating a never-ending cycle where tax increases inevitably lead to more tax increases.
