The UK debt pile hit £2.2trillion last month – the highest relative to GDP since 1961 – but borrowing started to ease as the economy recovered.
The government racked up another £22.8billion of liabilities, the second highest on record for June – but down from £28.2billion a year earlier.
Although the figure was slightly above the expectations of analysts, it was below the estimates from the OBR watchdog in the spring, giving Rishi Sunak some much-needed breathing room.
In a worrying sign, the official data showed that the government spent £8.7billion on interest payments for its debts – up from just £2.7billion in June 2020 as rates have increased.
The Chancellor pointed to the huge package of support he had implemented to shore up jobs and businesses, but stressed he was taking ‘tough choices’ to get debt back under control.
According to the Office for National Statistics, borrowing so far this financial year has reached £69.5billion since the end of March – £49.8billion less than the same period a year ago.
Although the figure was slightly above the expectations of analysts, it was below the estimates from the OBR watchdog in the spring
The ONS revised down estimates for borrowing in April and May, by £2.9billion and £3.7billion respectively, with National Insurance tax revenues higher than previously thought as pandemic restrictions have eased.
It also revised down borrowing for the financial year to the end of March again, by £1.5billion to £297.7 billion, though this was still the highest since the end of the Second World War and equivalent to 14.2 per cent of GDP.
The amount of debt sat at an eye-watering £2.2trillion at the end of June, or around 99.7 per cent of GDP, the highest ratio since the 102.5 per cent recorded in March 1961.
The UK’s debt levels have ballooned amid the pandemic as the Government has launched costly support measures to help households and businesses through the crisis.
Mr Sunak said: ‘I’m proud of the unprecedented package of support we put in place to protect jobs and help thousands of businesses survive the pandemic, and that we are continuing to support those who need it.
‘However, it’s also right that we ensure debt remains under control in the medium term, and that’s why I made some tough choices at the last Budget to put the public finances on a sustainable path.’
The ONS said central government receipts in June hit £62.2billion – a £9.5billion or 18 per cent increase year on year, which was driven higher by a 22 per cent jump in tax revenues to £45.5billion amid the wider economy rebound.
Borrowing in 2021-22 is looking likely to undershoot the £234billion predicted by the OBR at the March Budget due to the marked recovery.
But while debt levels are coming down from last year’s highs, influential think-tank the Institute for Fiscal Studies warned separately that any respite will prove short-lived for the Chancellor.
The amount of debt sat at an eye-watering £2.2trillion at the end of June, or around 99.7 per cent of GDP, the highest ratio since the 102.5 per cent recorded in March 1961
The IFS said the economy will be 3% smaller than official pre-Covid forecasts by the middle of the decade as the pandemic leaves permanent scars.
This will give Mr Sunak no ‘additional wiggle room for permanent spending giveaways if he is to remain on course to deliver current budget balance’, according to the IFS.
Samuel Tombs, at Macroeconomics, said tax hikes are likely to be on the way.
‘The Government will need to hike corporation tax and to increase the effective income tax rate by freezing existing thresholds, as planned in March, if it wants to ensure that public borrowing declines to 3% of GDP in the mid-2020s,’ he said.