The UK government borrowed more than anticipated last year, increasing pressure on public finances as the full impact of US tariffs looms. Borrowing reached £151.9bn in the year to March, up £20.7bn from the previous year. Chancellor Rachel Reeves is pushing for a trade deal with the US to prevent tariffs from affecting UK exports.
Higher borrowing levels have raised expectations that Reeves might cut public spending or raise taxes to adhere to her borrowing rules. Darren Jones, chief secretary to the Treasury, reiterated that Reeves’ borrowing rules are “non-negotiable.” Ruth Gregory of Capital Economics suggested Reeves may need to raise funds again in the Autumn Budget through spending cuts or tax increases.
Sluggish economic growth and higher interest rates on government borrowing have made it challenging for Reeves to stick to her fiscal rules without raising taxes. The UK is among several countries hit by US tariffs, aimed at boosting American manufacturing and jobs. Reeves seeks to avoid these tariffs through a trade deal, with US Vice-President JD Vance indicating a “good chance” of success.
The International Monetary Fund forecasted UK growth at 1.1% for 2025, down from 1.6%. The Office for National Statistics reported government borrowing was £15bn more than expected due to increased spending on pay and benefits. Debt interest paid by the government rose to £4.3bn last month.
— new from BBC