UK public debt rises to highest level since 1961 as election approaches Reuters

LONDON (Reuters) – Britain’s public debt rose last month to the highest as a share of the economy since 1961, official figures showed on Friday, adding to the financial pressure on the country’s next government after the July 4 election.

Government debt, excluding state-controlled banks, rose to 2.742 trillion ($3.47 trillion) or 99.8% of gross domestic product in May, up from 96.1% a year earlier, the National Statistics Office said.

The increase came despite lower-than-expected government borrowing in May, which came in at 15.0 billion pounds, below the median forecast of 15.7 billion pounds by economists in a Reuters poll.

Borrowing in the first two months of the financial year reached 33.5 billion pounds, which is 0.4 billion more than in the same period in 2023.

Britain looks set for a change of government following next month’s election, with Keir Starmer’s Labor Party far ahead of Prime Minister Rishi Sunak’s Conservatives in the polls.

Public debt has risen in Britain during the COVID-19 crisis, and public finances have also been affected by slow growth and the Bank of England’s 16-year high interest rates.

Labor and the Conservatives intend to stick to existing budget rules that require official forecasts to predict that debt as a share of GDP will fall between the fourth and fifth year of the forecast.

Workers say they will aim to use a limited budget for day-to-day spending, but will borrow for long-term investments. The Conservatives aim to keep the deficit below 3% of GDP.

Both Labor and the Conservatives have pledged not to raise income tax, value-added tax or other major taxes, but government budget forecasts in March showed tax as a share of GDP was on track to reach its highest level since 1948.

($1 = 0.7897 pounds)