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Scottish Sun
18 hours ago
- Business
- Scottish Sun
Families face £20billion tax sting as Government borrowing soars to second highest May level on record
Labour have been accused of 'spending recklessly' TAX YIKES Families face £20billion tax sting as Government borrowing soars to second highest May level on record Click to share on X/Twitter (Opens in new window) Click to share on Facebook (Opens in new window) FAMILIES face a £20billion tax hit after Government borrowing jumped last month, experts warned. The second highest figure on record for May, beaten only during the pandemic, saw borrowing surge to £17.7 billion, higher than forecast by the independent watchdog. Sign up for Scottish Sun newsletter Sign up Receipts for the Treasury were up to £82 billion due to higher income tax and the NI increase that kicked in from April. But with sluggish growth and the high borrowing costs could mean Rachel Reeves could lose her £10 billion financial cushion by the Budget. Thomas Pugh, economist at RSM UK, said the Chancellor may have to raise taxes between £10-£20 billion. He added: 'The under-performance of the economy and higher borrowing costs mean the Chancellor may already have lost the £9.9bn of fiscal headroom that she clawed back in March.' Shadow Chancellor, Sir Mel Stride said: 'Labour is spending recklessly, with no plan to pay for it. "Debt interest now costs us £100bn a year - that's almost twice the defence budget. 'Having turned on the spending taps, Labour have left themselves with only one option and that's to put up your taxes. Treasury Minister Darren Jones insisted the government had 'stabilised the economy and the public finances'. Growth forecast SLASHED in Spring Statement - sparking fears of MORE tax rises
Yahoo
a day ago
- Business
- Yahoo
Tax hike fears mount after government borrowing jumps in May
Fears the Chancellor will raise taxes in the autumn have been fuelled after official figures showed the highest May government borrowing outside the pandemic despite a tax boost from the national insurance hike. The Office for National Statistics (ONS) said borrowing surged to £17.7 billion last month, the second highest figure on record for May, surpassed only at the height of Covid. May borrowing was £700 million higher than a year earlier, though it was slightly less than the £18 billion most economists had been expecting. The higher borrowing came in spite of a surge in the tax take from national insurance after Chancellor Rachel Reeves increased employer contributions in April. The decision, which was announced in last autumn's budget, has seen wage costs soar for firms across the UK as they also faced a minimum wage rise in the same month. Experts warned the higher borrowing figures raised the chances of tax hikes to come in the budget later this year, with Ms Reeves under pressure to balance the books amid rising borrowing and her spending commitments. Thomas Pugh, economist at audit and consulting firm RSM UK, said he is pencilling in tax increases of between £10 billion and £20 billion. He said: 'The under-performance of the economy and higher borrowing costs mean the Chancellor may already have lost the £9.9 billion of fiscal headroom that she clawed back in March. 'Throw in the tough outlook for many Government departments announced in the spending review and U-turns on welfare spending and the Chancellor will probably have to announce some top-up tax increases after the summer.' Danni Hewson, AJ Bell head of financial analysis, said the borrowing figures 'will only add to speculation that the Chancellor will have to announce more spending cuts or further tax increases at the next budget if she wants to meet her fiscal rules and pay for her spending plans'. 'One big shock could wipe out any headroom Rachel Reeves might have, and there are still question marks about how much of GDP (gross domestic product) should be spent on defence and where the money is going to come from,' she added. Borrowing for the first two months of the financial year to date was £37.7 billion, £1.6 billion more than the same two-month period in 2024, according to the ONS. The data showed so-called compulsory social contributions, largely made up of national insurance contributions (NICs), jumped by £3.9 billion or 14.7% to a record £30.2 billion in April and May combined. Rob Doody, deputy director for public sector finances, said: 'While receipts were up, thanks partly to higher income tax revenue and national insurance contributions, spending was up more, affected by increased running costs and inflation-linked uplifts to many benefits.' While May's borrowing out-turn was lower than economists were expecting, it was more than the £17.1 billion pencilled in by the UK's independent fiscal watchdog, the Office for Budget Responsibility (OBR), in March. The figures showed that central government tax receipts in May increased by £3.5 billion to £61.7 billion, while higher NICs saw social contributions rise by £1.8 billion to £15.1 billion last month alone. Public sector net debt, excluding public sector banks, stood at £2.87 trillion at the end of May and was estimated at 96.4% of GDP, which was 0.5 percentage points higher than a year earlier and remains at levels last seen in the early 1960s. The ONS said the sale of the final tranche of taxpayer shares in NatWest, formerly Royal Bank of Scotland, cut net debt by £800 million last month, but did not have an impact on borrowing in the month. Interest payments on debt, which are linked to inflation, fell £700 million to £7.6 million due to previous falls in the Retail Prices Index (RPI). But recent rises in RPI are expected to see debt interest payments race higher in June. Chief Secretary to the Treasury Darren Jones insisted the Government had 'stabilised the economy and the public finances'. 'Since taking office, we have taken the right decisions to protect working people, begin repairing the NHS, and fix the foundations to rebuild Britain,' he said.
The Independent
a day ago
- Business
- The Independent
Tax hike fears mount after government borrowing jumps in May
Fears the Chancellor will raise taxes in the autumn have been fuelled after official figures showed the highest May government borrowing outside the pandemic despite a tax boost from the national insurance hike. The Office for National Statistics (ONS) said borrowing surged to £17.7 billion last month, the second highest figure on record for May, surpassed only at the height of Covid. May borrowing was £700 million higher than a year earlier, though it was slightly less than the £18 billion most economists had been expecting. The higher borrowing came in spite of a surge in the tax take from national insurance after Chancellor Rachel Reeves increased employer contributions in April. The decision, which was announced in last autumn's budget, has seen wage costs soar for firms across the UK as they also faced a minimum wage rise in the same month. Experts warned the higher borrowing figures raised the chances of tax hikes to come in the budget later this year, with Ms Reeves under pressure to balance the books amid rising borrowing and her spending commitments. Thomas Pugh, economist at audit and consulting firm RSM UK, said he is pencilling in tax increases of between £10 billion and £20 billion. He said: 'The under-performance of the economy and higher borrowing costs mean the Chancellor may already have lost the £9.9 billion of fiscal headroom that she clawed back in March. 'Throw in the tough outlook for many Government departments announced in the spending review and U-turns on welfare spending and the Chancellor will probably have to announce some top-up tax increases after the summer.' Danni Hewson, AJ Bell head of financial analysis, said the borrowing figures 'will only add to speculation that the Chancellor will have to announce more spending cuts or further tax increases at the next budget if she wants to meet her fiscal rules and pay for her spending plans'. 'One big shock could wipe out any headroom Rachel Reeves might have, and there are still question marks about how much of GDP (gross domestic product) should be spent on defence and where the money is going to come from,' she added. Borrowing for the first two months of the financial year to date was £37.7 billion, £1.6 billion more than the same two-month period in 2024, according to the ONS. The data showed so-called compulsory social contributions, largely made up of national insurance contributions (NICs), jumped by £3.9 billion or 14.7% to a record £30.2 billion in April and May combined. Rob Doody, deputy director for public sector finances, said: 'While receipts were up, thanks partly to higher income tax revenue and national insurance contributions, spending was up more, affected by increased running costs and inflation-linked uplifts to many benefits.' While May's borrowing out-turn was lower than economists were expecting, it was more than the £17.1 billion pencilled in by the UK's independent fiscal watchdog, the Office for Budget Responsibility (OBR), in March. The figures showed that central government tax receipts in May increased by £3.5 billion to £61.7 billion, while higher NICs saw social contributions rise by £1.8 billion to £15.1 billion last month alone. Public sector net debt, excluding public sector banks, stood at £2.87 trillion at the end of May and was estimated at 96.4% of GDP, which was 0.5 percentage points higher than a year earlier and remains at levels last seen in the early 1960s. The ONS said the sale of the final tranche of taxpayer shares in NatWest, formerly Royal Bank of Scotland, cut net debt by £800 million last month, but did not have an impact on borrowing in the month. Interest payments on debt, which are linked to inflation, fell £700 million to £7.6 million due to previous falls in the Retail Prices Index (RPI). But recent rises in RPI are expected to see debt interest payments race higher in June. Chief Secretary to the Treasury Darren Jones insisted the Government had 'stabilised the economy and the public finances'. 'Since taking office, we have taken the right decisions to protect working people, begin repairing the NHS, and fix the foundations to rebuild Britain,' he said.
Yahoo
5 days ago
- Business
- Yahoo
UK petrol prices poised to rise as Israel-Iran conflict pushes up cost of oil
Britons are braced for higher prices at the pumps, after a rise in oil prices caused by the conflict between Israel and Iran in recent days. Oil prices climbed again on Monday, as traders worried about the risks of a broader regional military conflict, which could disrupt supplies. Iran is a big oil producer, and accounts for about 3% of global supplies. As the conflict entered its fourth day, Brent crude rose by 0.5% in early trading pushing towards $75 a barrel, while US crude rose by 0.7% to $73.42. however, Brent later fell, down 0.5% at $73.78 a barrel. Related: Oil price rise risks 'adverse shock' to global economy – business live Crude prices jumped by more than 13% on Friday to their highest levels since January, and closed 7% higher for both benchmarks, after Israel hit more than 100 targets in Iran including nuclear facilities and missile sites, and Iran responded with its own missile strikes on Israel. Thomas Pugh, an economist at the consulting firm RSM UK, said: 'Just as tensions and uncertainty around global trade and tariffs seemed to be easing with a deal between the US and China on tariffs, the Israel-Iran escalation represents a new source of geopolitical tension. 'The main way this will impact UK businesses and the economy is through higher oil and natural gas prices.' He noted that oil prices have risen by about $10 a barrel in the past week, which is likely to result in a 5p increase in petrol and diesel prices at the pump over the 'next couple of months'. Average UK petrol prices remained stable at 132p a litre and diesel at 138.2p a litre on Friday, according to the AA, which will publish updated prices later on Monday. Wholesale petrol costs are above where they were in April and May but still way down on levels seen in the first quarter of this year. Aside from the oil price, another big factor that influences prices at UK pumps is US demand for gasoline during the summer motoring season, the AA said. The sell-off in oil markets has been limited, so far. In London, the FTSE 100 share index gained nearly 0.4% and the oil company Shell's stock climbed by 1.3%, while BP was up 0.2%. Stock markets in Germany and France rose by almost 0.4% and 0.7%. 'The market currently anticipates a limited conflict, though there is little indication that hostilities will end quickly,' said Jochen Stanzl, the chief market analyst at CMC Markets. 'It is expected that fighting will continue unabated this week, albeit on a limited scale.' Mohamed El-Erian, an economic adviser to insurance giant Allianz, said the conflict risked causing slower global growth, increased inflationary pressure, reduced 'policy flexibility' for central banks, and 'further gradual erosion of the global order'. James Hosie, an analyst at Shore Capital, said the spike in Brent crude to almost $75 a barrel could be temporary, if the direct impact on Iran's oil facilities remained limited. Over the weekend, airstrikes by Israel targeted energy assets including the Shahran oil depot and Shahr Rey refinery close to Tehran, and the South Pars gas field. This raises the risk of a direct impact on Iran's 2m barrels of oil exports a day. There are fears that Iran's next response could target regional energy supplies by disrupting tanker movements in the strait of Hormuz – the waterway off the south coast of the country through which 20% of global oil supplies and 20% of liquefied natural gas flow. This would mark a significant escalation of the conflict, as it would affect exports from Saudi Arabia and other Middle Eastern oil and liquefied natural gas producers, along with their customers, particularly China, Hosie said. However, he said other members of the Opec oil cartel and allies, notably Saudi Arabia, could raise oil production to offset any disruption to Iranian exports, and others such as US shale producers could also step in. The price of oil had been well below the $80.53 a barrel average recorded last year before the conflict, with prices at the pump easing. Rachel Reeves said over the weekend that the UK government would do 'everything in [its] power' to protect people in Britain from the knock-on economic effects. The chancellor would not 'take anything off the table' to tackle the threat of rising energy costs, she told the BBC's Sunday with Laura Kuenssberg programme. After Russia's full-scale invasion of Ukraine in 2022, oil prices spiked to nearly $130 a barrel, raising prices for everything from transport to food. 'There is no complacency from myself or the Treasury,' Reeves told the BBC. In 2022, the Conservative government stepped in to help households with their energy bills, but the chancellor said 'we are not anywhere near that stage at the moment'. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
The Guardian
5 days ago
- Business
- The Guardian
UK petrol prices poised to rise as Israel-Iran conflict pushes up cost of oil
Britons are braced for higher prices at the pumps, after a rise in oil prices caused by the conflict between Israel and Iran in recent days. Oil prices rose again on Monday, as traders worried about the risks of a broader regional military conflict, which could disrupt oil supplies. Iran is a big oil producer, and accounts for about 3% of global supplies. As the conflict entered its fourth day, Brent crude rose 0.5% on Monday morning to $74.60 (£54.91) a barrel, while US crude rose 0.7% to $73.42. Crude prices jumped more than 13% on Friday to their highest levels since January, and closed 7% higher for both benchmarks, after Israel hit more than 100 targets in Iran including nuclear facilities and missile sites, and Iran responded with its own missile strikes on Israel. Thomas Pugh, an economist at the consulting firm RSM UK, said: 'Just as tensions and uncertainty around global trade and tariffs seemed to be easing with a deal between the US and China on tariffs, the Israel-Iran escalation represents a new source of geopolitical tension. 'The main way this will impact UK businesses and the economy is through higher oil and natural gas prices.' He noted that oil prices have risen by about $10 a barrel in the past week, which is likely to result in a 5p increase in petrol and diesel prices at the pump over the 'next couple of months'. On Monday, petrol prices hovered between 128.9p and 131.9p a litre in the London area, and diesel about 134.9p a litre, according to However, there has not been a complete sell-off in oil markets. In London, the FTSE 100 share opened up 0.2%, and the oil companies BP and Shell's stocks were up just over 1%. Stock markets in Germany and France rose marginally on opening. 'The market currently anticipates a limited conflict, though there is little indication that hostilities will end quickly,' said Jochen Stanzl, the chief market analyst at CMC Markets. 'It is expected that fighting will continue unabated this week, albeit on a limited scale.' James Hosie, an analyst at Shore Capital, said the spike in Brent crude to $75 a barrel could be temporary, if the direct impact on Iran's oil facilities remains limited. Over the weekend, airstrikes by Israel targeted energy assets including the Shahran oil depot and Shahr Rey refinery close to Tehran, and the South Pars gas field. This raises the risk of a direct impact on Iran's 2m barrels of oil exports a day. There are fears that Iran's next response could target regional energy supplies by disrupting tanker movements in the strait of Hormuz – the waterway off the south coast of the country through which 20% of global oil supplies and 20% of liquefied natural gas flow. Sign up to Business Today Get set for the working day – we'll point you to all the business news and analysis you need every morning after newsletter promotion This would mark a significant escalation of the conflict, as it would affect exports from Saudi Arabia and other Middle Eastern oil and LNG producers, along with their customers, particularly China, Hosie said. However, he said other members of the Opec oil cartel and allies, notably Saudi Arabia, could raise oil production to offset any disruption to Iranian exports, and others such as US shale producers could also step in. The price of oil had been well below the $80.53 a barrel average recorded last year before the conflict, with prices at the pump easing. Rachel Reeves said over the weekend that the UK government would do 'everything in [its] power' to protect people in Britain from the knock-on economic effects. The chancellor would not 'take anything off the table' to tackle the threat of rising energy costs, she told the BBC's Sunday with Laura Kuenssberg programme. After Russia's full-scale invasion of Ukraine in 2022, oil prices spiked to nearly $130 a barrel, raising prices for everything from transport to food. 'There is no complacency from myself or the Treasury,' Reeves told the BBC. In 2022, the Conservative government stepped in to help households with their energy bills, but the chancellor said 'we are not anywhere near that stage at the moment'.
