Higher-than-expected borrowing figures for the month of April have put pressure on Chancellor Rachel Reeves as experts claim taxes will now likely have to rise in the autumn.
Borrowing – the difference between spending and tax income – was £20.2bn, up £1bn from April last year, the Office for National Statistics (ONS) said.
It marks the fourth highest figure for April since monthly records began in 1993.
This has left experts predicting the government will find it very hard to meet its self-imposed rules for the economy without future tax rises.
“We expect a combination of higher taxes and slightly higher borrowing at the next Budget,” said Thomas Pugh, economist at RSM UK.
Matt Swannell, chief economic adviser to the EY ITEM Club, said: “Talk of the reinstatement of some winter fuel payments and the likely need to spend more on defence will further increase the pressure for tax rises.”
Tax receipts were more than £5bn higher, in part due to increases in National Insurance contributions paid by employers.
But government expenditure also rose, largely due to pay rises, higher costs due to inflation, and increases in pensions and other benefits.
The ONS also said that borrowing for the financial year that ended in March is now estimated to be £148.3bn, which is £3.7bn less than initially thought.
However, the figure is still £11bn more than expected by the UK government’s independent forecaster, the Office for Budget Responsibility.
Analysts had predicted borrowing of £17.9bn.
Reacting to the figures, Chief Secretary to the Treasury Darren Jones said: “After years of economic instability crippling the public purse, we have taken the decisions to stabilise our public finances, which has helped deliver four interest rate cuts since August, cutting the cost of borrowing for businesses and working people.”
However, Ruth Gregory, deputy chief UK economist at Capital Economics, said the “poor start” to the financial year increased the chances that more tax rises will be needed in the autumn Budget.
She said weaker economic growth forecast over the next few months is likely to hit tax receipts, adding to pressure on government finances.
“With the PM announcing a partial U-turn on the cut to winter fuel payments, the dilemma faced by the chancellor over how to deal with increased spending pressures in environment of low economic growth and high interest rates hasn’t gone away,” Ms Gregory said.
“With the markets seemingly uneasy about more public borrowing, further tax rises are starting to feel inevitable.”
Conservative shadow chancellor Mel Stride said: “Instead of reining in spending, the Labour chancellor has piled billions onto the national debt by fiddling the fiscal rules and maxing out the national credit card.”
Liberal Democrat Treasury spokesperson Daisy Cooper accused the chancellor of “making a series of blunders.”
“The warning lights must be flashing in the Treasury this morning,” she said.
