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Fiscal Policy · Gilt Yields · Government Borrowing · UK Economy
UK government net borrowing surged to £23.2bn in May, exceeding economists' £19bn prediction, as Andy Burnham's Makerfield by-election victory and a potential leadership challenge signal a shift towards looser fiscal policy and increased public spending.
The Office for National Statistics reported May's borrowing included a record £11.7bn in debt interest costs, pushing gilt yields to a nearly 30-year high. The current budget deficit reached £18.5bn, and public sector debt as a share of GDP increased to 95.1 percent.
Chief Secretary to the Treasury Lucy Rigby acknowledged global economic challenges but affirmed the government's economic plan. Analysts, including Richard Carter of Quilter Cheviot, warn a Burnham premiership will lead to higher spending pledges and tax cuts, exacerbating fiscal pressures.
Economists like Modupe Adegbembo of Jefferies state investors have already priced in some risks of a Burnham leadership. Chancellor Rachel Reeves faces pressure to fund increased defense spending, potentially an additional £40bn annually to reach 3.5 percent of GDP, and to implement energy support packages amid higher oil and gas prices, further straining public finances according to the Office for Budget Responsibility.
