Government borrowing shows surprise £2bn rise
Government borrowing unexpectedly shot up last month as Brexit-induced inflation made debt payments more expensive.
The Office for National Statistics (ONS) said public sector net borrowing, excluding state-owned banks, increased by £2 billion to £6.9 billion in June compared with the same month last year.
Economists had pencilled in a total of £4.8 billion.
The deficit widened as the amount forked out on debt interest rose by a third to £4.9 billion last month, as inflation drove up the cost of servicing index-linked Government bonds.
The ONS said total spending climbed by 8.3% to £59.9 billion in June in contrast to 2016, while tax receipts lifted by 4.6% to £54.3 billion.
Samuel Tombs, chief UK economist for Pantheon Macroeconomics, said the spike in Government spending was the key factor behind last month's borrowing rise.
He said: "Although spending rose in most areas, a £1.2 billion increase in interest payments and £0.8 billion rise in contributions to the EU's budget, partly to correct for underpayments in previous years, were to blame for the particularly strong growth."
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 borrowing for the current financial year to date - April to June 2017 - rose by £1.9 billion to £22.8 billion compared with the same period last year.
The Office for Budget Responsibility (OBR), Britain's fiscal referee, expects the Government to record a budget deficit of £58.3 billion for the financial year to March 2018.
Focusing on Britain's debt pile, public sector net debt excluding state-owned banks jumped by £128.5 billion to £1.75 trillion, equivalent to 87.4% of gross domestic product (GDP).
A Treasury spokesman said: "Today's release shows that our national debt, at £65,000 for every household, is still too high and leaves us vulnerable to any future shocks.
"That is why we have a credible fiscal plan to get debt falling and deliver the sound public finances needed for a stronger economy and higher living standards."
The latest update on the deficit comes just a week after the OBR flagged the potential threats to the public finances in its first Fiscal Risks report.
Putting the public finances through the same stress tests faced by banks, the watchdog said the Government's fiscal targets "would be missed by a large margin".
It added that the UK's debt was higher than before the banking crisis, meaning the UK's financial position was "much more sensitive" to higher inflation and interest rates.
On June's borrowing amount, Labour's shadow chancellor John McDonnell said: "Seven years of Tory cuts have left our economy weaker, with falling wages, yet the deficit has not been eliminated two years after they claimed it would be, and the national debt continues to rise.
"The Chancellor should stop handing out massive tax giveaways to big businesses and the super-rich, and instead give our hard-pressed public sector workers a pay rise, so we can end the travesty in our country of nurses having to rely on food banks."