Government borrowing in May £4.8bn higher than predicted
Government borrowing in May was £4.8bn higher than predicted, say leading audit, tax and business advisory firm, Blick Rothenberg.
Tom Goddard, an assistant manager at the firm, said: “Despite a growing tax take, government borrowing in May 2026 came in at £23.3bn, well above the £18.5bn predicted by City economists.”
He added: “Debt interest, public services, and benefits are all rising faster than tax receipts. Year-to-date borrowing has reached £46.3bn, some £8.9bn higher than last year, and £7.7bn above the Office for Budget Responsibility (OBR)’s own forecast, while public sector net debt has risen to 95.1% of Gross Domestic Product (GDP), a level not seen since the early 1960s.”
Tom said: “The principal driver of this is the Iran War. Public finances are being directly squeezed by higher interest rates on government debt, as markets anticipate a prolonged period of elevated inflation due to volatile oil prices. Central government debt interest alone reached £11.7bn in May which is the highest May reading on record.”
He added: “HMRC’s latest statistics show that the total tax recites for April to May 2026 are £153.7bn. Income tax receipts are up 9.2% over the past twelve months. The increase will likely be driven by the ongoing freeze on income tax thresholds, now extended to 2031, which continues to pull more taxpayers into higher rate bands through fiscal drag. Corporation tax receipts have increased by 5.4%.”
Tom said: “However, as this ever-increasing tax take is still not enough to cover government deficit, the question of where additional revenue is to be found will occupy many of those at the Treasury, especially off the back of the UK defence investment plan likely to be published in the coming weeks.”
He added: “A 1% rise in the basic rate of income tax could generate almost £8bn in 2026/27, a 1% increase in employee National Insurance Contributions (NICs) could yield around £5bn and raising the higher and additional rates by 1% could bring in a further £2.2bn.”