Pantheon: UK June borrowing data improves, but new government’s spending tendencies and rising interest rates are expected to push up future borrowing

(1) In June, the UK's public sector net borrowing was £16 billion, lower than the £23.9 billion recorded in the same period last year and below market expectations. The data for April and May were also revised downward, indicating that short-term fiscal conditions are better than anticipated.
(2) However, analyst Rob Wood warns that borrowing levels may rise in the future, as higher gilt yields and inflation rates than previously assumed will increase debt interest payments. At the same time, the new Prime Minister, Burnham, has shown a tendency to boost political support by increasing spending.
(3) Given that there are up to three years until the next general election and Labour’s current approval rating is relatively low, the government faces significant pressure to expand fiscal policy. Actual borrowing is therefore likely to exceed current forecasts.