Higher tax receipts were unable to prevent a rise in public sector borrowing in May to £17.7bn, up from £17bn a year earlier and the second highest for the month on record.
A poll of City economists had forecast public sector net borrowing – the difference between public spending and income – would be £17.1bn.
The figures will add to the concerns that the government is struggling to bring down the annual deficit to keep within strict spending rules.
While last October’s budget allowed for more than £100bn of extra investment spending, the chancellor, Rachel Reeves, said day-to-day Whitehall budgets must remain within strict limits.
However, the measure of shortfall in day-to-day spending – the current budget deficit – remained below the forecast by the Office for Budget Responsibility (OBR), which provides independent forecasts of the public finances.
Reeves has introduced extra taxes on businesses – including a rise in national insurance contributions – which were implemented in April.
The OBR said it expected the current deficit to be £13bn in May, but it was £12.8bn, marking the second consecutive month when the deficit fell under the OBR prediction.
Backbench Labour MPs are expected to rebel against cuts to benefits worth more than £5bn in the welfare bill introduced to parliament on Wednesday.
Most major economic forecasters, including the International Monetary Fund and the Bank of England have downgraded the UK’s growth prospects this year, potentially reducing tax receipts over the longer term and forcing the chancellor to make further spending cuts or raise taxes to bridge the gap.
In March, the OBR said it expected borrowing to fall from £152bn in 2024-25 to £117.7bn in the 2025-26 financial year.
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However, the following month’s deficit came in at £20.2bn, which was £1bn more than the same month a year earlier and higher than the £17.9bn economists predicted.
April’s borrowing was the fourth biggest on record, surpblocking only deficits in April 2020 and 2021 during the height of the Covid pandemic, and in April 2012 linked to costs related to the privatisation of Royal Mail.
