UK borrows more than expected as Reeves faces Iran war challenges
Britain's Public Finances and Economic Pressures
LONDON, May 22 (Reuters) - Britain's public finances showed a bigger-than-expected shortfall of 24.3 billion pounds ($32.63 billion) last month, the second-highest borrowing for April on record, official figures showed on Friday.
A Reuters poll of economists had pointed to a 20.9 billion-pound deficit for the month, the first of the financial year.
Government Response and Fiscal Targets
Finance minister Rachel Reeves has said she will stick to her target to balance day-to-day spending with tax revenues by the end of the decade, despite the pressure on her to help turn around the Labour Party's low standing in opinion polls which could force Prime Minister Keir Starmer out of his job.
Impact of Iran War on Economic Policy
The Iran war has made the challenge all the harder by raising the risk of an economic slowdown which would hurt tax revenues and has added to demands on Reeves for more public spending to protect households and businesses from the energy price shock caused by the conflict.
Tax Measures and Support Initiatives
Reeves said on Thursday that she would raise more tax from oil and gas companies to fund support measures.
Recent Borrowing Data and Projections
Friday's data showed government receipts rose by 2.9% in April from the same month in 2025 while spending was up 6.5%.
Britain's budget forecasters said in early March they expected public sector borrowing to shrink to 3.6% of gross domestic product in the 2026/27 tax year. That would be the smallest deficit since before the COVID-19 pandemic.
Borrowing in the financial year which ended in March was 3 billion pounds lower than initially estimated at 129 billion pounds, or 4.2% of GDP, down from 5.2% in the 2024/25 tax year, the Office for National Statistics said.
Political Uncertainty and Fiscal Policy
Investors are also nervous about the possibility of a change in political leadership in Britain with many Labour lawmakers demanding that Starmer stand down. His most likely successor, Manchester mayor Andy Burnham, has said he would stick with the fiscal rules being pursued by Reeves.
($1 = 0.7448 pounds)
(Writing by William Schomberg; editing by Philippa Fletcher)
