Red alert on public finances as borrowing hits new high outside Covid
Warning lights are flashing on the public finances today after borrowing hit a new record outside Covid last month.
Government borrowing spiked to £23.3billion in May, far higher than analysts had anticipated.
The level was the highest for the month apart from 2020, when the pandemic was peaking.
The rise was fuellled by debt interest costs surging to a new May peak, as well as higher spending - which outweighed bigger tax revenues as the burden heads towards a new peak.
The grim numbers will fuel concerns about the danger of Labour lurching to the Left under Andy Burnham, as many of his MP supporters want.
The outgoing Greater Manchester Mayor is poised to mount a coup against Keir Starmer after romping to victory in the Makerfield by-election overnight.
Government borrowing spiked to £23.3billion in May, far higher than analysts had anticipated
The rise was fuellled by debt interest costs surging to a new May peak
The Office for National Statistics (ONS) said borrowing was nearly a third (30.4 per cent), or £5.4billion, higher this May than a year earlier.
It was also more than the £18.8billion expected by most economists and the £17.7billion forecast by the Treasury's Office for Budget Responsibility (OBR) watchdog.
Interest costs for Government debt jumped to £11.7billion – the highest ever recorded in any May.
Central government expenditure on goods and services increased by £2.2billion to £39.6billion in May, as inflation took its toll.
And benefits paid out increased by £1.2billion to £28.4billion, largely due to inflation-linked rises including to the state pension.
The extra costs outweighed a £2.7billion bump in tax revenues, at £63.7billion.
That included £1.2 billion extra in VAT and £900million in income tax.
ONS senior statistician Tom Davies said: 'Borrowing in the first two months of the financial year was nearly £9billion higher than the same period of 2025.
'Spending on debt interest, public services, investment and benefits all increased in May 2026, compared with last May, more than outweighing higher tax receipts.'
The markets have been spooked by signs that Mr Burnham could take Labour to the Left with a major spending splurge funded by borrowing and even more tax.
He has hinted at wealth taxes, revaluing council tax and called for nationalisations.
But Mr Burnham has also executed screeching U-turns on a slew of ideas, including ruling out billions of pounds of compensation for so-called WASPI women just hours after supporting the prospect.
The former Cabinet minister caused a furore at last year's Labour conference in Liverpool after suggesting in an interview that politicians had to 'get beyond this thing of being in hock to the bond markets'.
But he later seemed to row back from these comments, saying last month he supported Ms Reeves's fiscal rules.
He told ITV: 'There needs to be a plan to get debt down, but beyond that, we need to change politics and take the turbulence out of British politics, because that is a cause of uncertainty that then has that impact in the markets.'
Andy Burnham has begun his march on Westminster - and potentially to Downing Street - after winning the Makerfield by-election
Borrowing is running above the level predicted by the OBR watchdog
Rachel Reeves, who is regarded as unlikely to be kept on as Chancellor if Mr Burnham becomes PM, delivered a shot across his bows yesterday, warning the fiscal rules must stay in place.
She told a conference: 'We got elected on the promise to return stability to the economy, and anyone who wanted to deviate from that will not be fulfilling the manifesto commitments.'
Ms Reeves has already pushed the tax burden towards a record high, with unprecedented increases over the past two years.
Badenoch blasts 'moaning' female Labour MPs over Burnham jobs 'quota'
Kemi Badenoch has told Labour women to earn a job in Andy Burnham's Cabinet instead of demanding they are handed jobs because of their gender.
The Tory leader lashed out today amid reports that female MPs are demanding the de-facto new prime minister introduce a 50:50 gender split 'quota' in his government.
Amid reports that former foreign secretary David Miliband is being lined up to return to the role, possibly with his brother Ed as Chancellor, one female minister also complained that Burnham could not have 'more Milibands than women' in the top posts.
But in a scathing article in the Times today Mrs Badenoch told them to 'stop moaning' and get chosen on merit instead of retreating into 'more of the failed identity politics that is holding back our country'.
'There are many, many reasons why you shouldn't have any Milibands in the cabinet,' she said.
'But complaining that the boys haven't given them the right jobs or that the boys are taking all the jobs, just shows that Labour's women still don't get it.'
The idea of quotas was also attacked by Baroness Jacqui Smith, Labour's Skills Minister.
Asked by Times Radio if Mr Burnham should reserve jobs for women, she said: 'No, I think what Andy Burnham should be doing is building the very best team around him to change this country.'
A letter written by the Women's Parliamentary Labour Party has called on Mr Burnham to ensure a 50:50 split between men and women in government jobs
Amid reports that former foreign secretary David Miliband (above, right, in 2010) is being lined up to return to the role, possibly with his brother Ed as Chancellor, one female minister complained that Burnham could not have 'more Milibands than women' in the top posts
But Mrs Badenoch told them to pipe down and get chosen on merit instead of retreating into 'more of the failed identity politics that is holding back our country'
A letter written by the Women's Parliamentary Labour Party and seen by the BBC has called on Mr Burnham to ensure a 50:50 split between men and women in government jobs after he succeeds Sir Keir Starmer.
'We are asking you to demonstrate this change from day one and address the toxicity and misogyny within our own party and government,' it said.
Labour has never had a female leader, while the Conservatives have had three, and Mrs Badenoch urged the government to follow its meritocratic example.
'If you run a meritocracy, then you do not have to worry about jobs for the boys,' she wrote.
'Every woman who is a Conservative MP, every woman who has ever won the leadership, has had to fight to get where she is.
'By contrast, Labour women are demanding guarantees from Burnham. But the truth is he doesn't have to give any guarantees.
'If none of Labour's women are prepared to get their hands dirty and challenge him for the leadership, their demands are toothless.'
'In fact, it's quite revealing that the women's parliamentary Labour Party has written to Burnham asking him to commit himself to at least 50 per cent female ministers.
'This has nothing to do with meritocracy. It is yet more of the failed identity politics that is holding back our country.'
