UK borrowing hits second-highest May level as debt interest surges

Britain’s public finances came under fresh strain in May as public sector net borrowing excluding banks climbed to £23.3 billion, the second-highest May figure on record and £5.6 billion above the Office for Budget Responsibility’s forecast. The jump was driven in large part by debt interest, which reached a May record of £11.7 billion.

Higher inflation helped push up the cost of servicing inflation-linked debt, giving the month its sharpest edge. Inflation was 3.1% in May, while the government was also contending with faster growth in core spending. Benefits spending, including pensions, was 7.4% higher than a year earlier, and spending on public services rose 2.9%.

Tax and other government revenues did rise, up 4.1% so far this year, but not fast enough to keep pace with expenditure. Borrowing for the financial year to May reached £46.3 billion, £8.9 billion more than in the same period of 2025 and £7.7 billion above the OBR’s forecast. That left borrowing at 1.5% of GDP, the fifth-highest reading since monthly records began in 1993.

The broader fiscal backdrop remains difficult. Public sector net debt was provisionally estimated at 95.1% of GDP at the end of May, a level last seen in the early 1960s. The Office for National Statistics said the May figures were first estimates and would be revised over the coming months, but the scale of the overshoot already points to a Treasury under pressure.

That makes May’s borrowing surge more than a single bad month. The inflation-linked debt bill was a clear one-off driver, but the combination of higher welfare spending, rising public service costs and a debt stock close to post-war highs suggests a deeper structural squeeze on the public finances. For Rachel Reeves, it narrows the room for tax cuts or new spending commitments and raises the political cost of any fiscal slippage.

The pressure has intensified as Reeves told Parliament on 21 May that the government was responding to the war in Iran and rising costs, while defence minister John Healey resigned in protest over the strain on spending plans. Against that backdrop, the OBR’s March forecast of a £115.5 billion deficit for 2026/27, equal to 3.6% of national income, now looks like a test of whether the government can still credibly steer borrowing back down.