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UK Government Borrowing Falls: What It Means for Your Bills

The UK government borrowed less money than expected in June — but experts warn there’s still limited room to help households with living costs.

The Office for National Statistics announced that the government borrowed £16bn in June, which is £7.9bn less than a year ago. While this sounds like good news, it’s important to understand what it actually means for your wallet.

Government borrowing is simply the difference between what the state spends and what it collects in taxes. When borrowing falls, it can suggest the economy is generating more tax revenue — which is exactly what happened here. Higher income tax and VAT receipts helped June’s figures look healthier than predicted.

However, the bigger picture is less rosy. The UK’s total debt now sits at nearly £3 trillion, which is roughly equal to the entire annual output of the British economy. That’s a significant burden, and it limits how much extra money the government can spend on measures to ease the cost of living squeeze.

The new Prime Minister Andy Burnham and Chancellor John Healey have both promised to stick to strict borrowing rules set by their predecessor. This means they can only use any extra breathing room “within” those rules — limiting how much they can do to help households struggling with bills.

On a more positive note, the government’s debt interest payments fell sharply in June to £11.8bn, nearly a third lower than last year. This is because inflation-linked debt costs less when inflation falls. However, it was still the fourth highest June total on record, showing that servicing our national debt remains expensive.

Meanwhile, wage growth remains sluggish at 3.4% annually, and private sector wages have dipped below 3% for the first time since 2020. Combined with warnings that energy bills will rise again in the second half of the year, many households face a continued squeeze on living standards.

For everyday Brits, the key takeaway is this: while government finances are stabilising slightly, don’t expect major new spending on cost-of-living support. Focus on what you can control — reviewing your energy supplier, checking if you qualify for any benefits, and budgeting carefully for autumn bill increases. Check Turn2us.org.uk or StepChange.org for free financial advice tailored to your situation.