UK Borrowing Falls More Than Expected in June, Boosting Andy Burnham’s Economic Plans and Energy Bill VAT Cuts

The UK government borrowed less than expected in June, in a boost for Andy Burnham as he set out plans to cut VAT on household electricity bills and promised a new direction for the British economy. This development comes as the new prime minister tries to reassure markets that his policies will not derail the country’s fiscal progress. The Office for National Statistics (ONS) said public sector net borrowing – the difference between government spending and income – was £16bn last month, £7.9bn less than in June 2025..

However, some economists believe that this improvement in borrowing may be short-lived, as the prime minister’s plan to cut VAT on household electricity bills could end up costing the exchequer. The proposed reduction in VAT will benefit low-income households, but it may also lead to a significant decrease in tax revenue. The cut in VAT aims to provide some relief to households struggling with rising energy costs..

The proposal is part of a broader package of policies aimed at addressing the cost of living crisis and promoting economic growth. Critics argue that the move is a populist gesture that may not have a lasting impact on the economy. The prime minister’s plan to cut VAT on household electricity bills has been seen as a departure from the previous government’s approach to tax policy..

The previous administration’s focus on raising taxes to fund public services has been replaced by a more expansionary fiscal policy under the new prime minister. While the cut in VAT may help to boost economic growth in the short term, some economists warn against its potentially negative effects on public finances over the longer term. The reduction in VAT will need to be funded through other means, which could put pressure on the government’s ability to meet its fiscal targets..

The ONS figures also reveal that public sector current receipts, which include taxes, duties, and other income, were £53.9bn in June, up £1.1bn from a year ago. This increase in tax revenue will help to offset any potential losses from the reduction in VAT. The Office for National Statistics also reported that the public sector net debt, which includes government borrowing and outstanding loan commitments, rose to £2.38 trillion in June, from £2.35 trillion in May..

This increase in public debt is a concern for some economists, who fear that it could make it more difficult for the government to meet its fiscal targets. The proposed reduction in VAT has been seen as a key part of the new prime minister’s plans to boost economic growth and improve living standards for low-income households. Some analysts believe that the move will be seen as a welcome relief for households struggling to pay their electricity bills, but others have raised concerns about its potential impact on public finances..

In a statement, the new prime minister said that the proposed reduction in VAT was part of a broader package of policies aimed at addressing the cost of living crisis and promoting economic growth. He emphasized that the government’s priority was to support low-income households and promote economic stability. Some economists also point out that the cut in VAT may have a disproportionate effect on middle-class households, who may not benefit as much from the reduction..

They argue that a more targeted approach to tax policy would be more effective in addressing the needs of low-income households. The Office for National Statistics has also reported that the public sector net borrowing as a percentage of GDP was 4.6% in June, compared with 4.9% a year ago. This decline in borrowing as a percentage of GDP suggests that the government’s fiscal position is improving, but some economists caution that this trend may be reversed if the proposed reduction in VAT leads to a significant decrease in tax revenue..

The prime minister’s plan to cut VAT on household electricity bills has been seen as a bold move by some analysts, who believe that it will help to address the cost of living crisis and promote economic growth. However, others have raised concerns about its potential impact on public finances and the need for a more sustainable approach to tax policy..