Public Finances (May)

The larger-than-expected rise in public borrowing in May is an early blow for the government on a day when it is expected to lose two by-elections. What’s more, the combination of a further weakening in economic activity and more interest rates rises will probably mean that borrowing overshoots the OBR’s 2022/23 forecast of £99bn by at least £10bn. That will limit the ability of the Chancellor to cut taxes and/or provide more grants to households when the cost of living crisis worsens later this year.