Borrowing up as economy slows

Government borrowing rose unexpectedly last month, hampering efforts to shore up the public finances as the UK economy looks set to slow.

The Office for National Statistics said public sector net borrowing, excluding state-owned banks, increased by £2 billion to £6.9bn in June compared with the same month last year.

Economists had pencilled in a total of £4.8bn.

Prime Minister Theresa May has vowed to deliver a balanced budget by the “middle of the next decade”, knocking back Chancellor Philip Hammond’s previous target of putting the public finances back in the black by 2020.

Mr Hammond faces an increasingly tough challenge to drive down the deficit, as consumer spending is squeezed by high inflation and sluggish wage growth, threatening to drag on the Government’s tax income.

The statistics agency said the budget deficit for the current financial year to date – April to June 2017 – climbed by £1.9bn to £22.8bn compared with the same period last year.

The Office for Budget Responsibility (OBR), Britain’s fiscal referee, expects the Government to record a deficit of £58.3bn for the financial year to March 2018.

Focusing on Britain’s debt pile, public sector net debt excluding state-owned banks jumped by £128.5bn to £1.75 trillion, equivalent to 87.4% of gross domestic product (GDP).

Tough challenge: Chancellor Philip Hammond.