Rachel Reeves has been ridiculed for Government borrowing figures (Image: Getty)
Rachel Reeves's spending bonanza on public sector pay rises, national insurance hikes and higher benefits led to spiralling borrowing last month.
The Office for National Statistics (ONS) said public sector net borrowing rose to ￡20.2 billion, its fourth-highest April figure on record after increasing ￡1 billion year-on-year.
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The state borrowing figure reflects the difference between Government spending and its income, largely through tax receipts.
The latest figure showed that the Chancellor had to borrow more money than expected over the month, surpassing analyst predictions of ￡17.6 billion.
It comes as Ms Reeves seeks to meet her fiscal rule of balancing day-to-day spending with revenues by 2029-30, while improving public services and targeting accelerated economic growth.
Shadow Chancellor Mel Stride declared: “The latest borrowing figures expose the true cost of Labour’s reckless economic policies.
“Instead of reining in spending, the Labour Chancellor has piled billions onto the national debt by fiddling the fiscal rules and maxing out the national credit card.
“This follows on from borrowing last financial year coming out billions of pounds higher than the plans Labour inherited, and means wasting billions more pounds of taxpayers’ money on debt interest.”
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Rachel Reeves's decisions have been heavily criticised (Image: Getty)
The rise in borrowing was largely linked to increases in public sector pay, national insurance payments and higher benefits and state pensions.
Deputy director for public sector finances at the ONS Rob Doody said: "At ￡1 billion higher than the same time last year, this April's borrowing was the fourth highest for the start of the financial year since monthly records began more than 30 years ago.
"Receipts were up on last April, thanks partly to the higher rate of national insurance contributions.
"However, this was outweighed by greater spending, due to rising public services' running costs and increases in many benefits and state pensions."
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Chief Secretary to the Treasury, Darren Jones, said: "After years of economic instability crippling the public purse, we have taken the decisions to stabilise our public finances, which has helped deliver four interest rate cuts since August, cutting the cost of borrowing for businesses and working people.
"We're fixing the NHS, with three million more appointments to bring waiting lists down, rebuilding Britain with our landmark planning reforms and strengthening our borders, delivering on the priorities of the country through our Plan for Change."
Meanwhile, social benefits paid by the state rose ￡1.3 billion to ￡26.8 billion after inflation-linked rises in many benefits.
Public sector net debt was estimated at 95.5% of UK GDP (gross domestic product) at the end of April 2025, meaning the proportion of debt was 0.7 percentage points higher than a year earlier and remains at levels last seen in the early 1960s.
The figures also revealed the amount raked in in inheritance tax has soared.
Ian Dyall, Head of Estate Planning at wealth management firm Evelyn Partners, said: “The 2025/26 financial year opens where the previous one left off, with a predictable and substantial annual rise in Inheritance Tax receipts. Estimates last month revealed that IHT receipts for the 2024/25 financial year were 10.8% up on the previous one, and there’s nothing to suggest the current one will be any different.
“What has stirred up some interest in the Government’s intentions for IHT – aside from those announced at the October Budget – is the memo from the Deputy PM to the Chancellor leaked this week.
“That called for – among other tax rises - IHT relief on AIM shares to be removed altogether, which would go further than the current cut to 50% due for April 2026, and would save the Treasury ￡1billion.
"Whether this suggestion carries any weight with the Chancellor is unknown, but with the PM also rowing back on cuts to the Winter Fuel Allowance this week, questions are bound to arise around tax if the fiscal outlook doesn’t improve before the Autumn Budget.
“Some in Government obviously see the passing on of estates as a legitimate target for tightening up the tax net, so whether or not there are any changes to IHT reliefs at the next Budget, it would be surprising if we got to the next election without any.”
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Nicholas Hyett, Investment Manager at Wealth Club said: “Over the last 20 years the inheritance tax tab has increased from ￡3.3 billion to ￡8.2 billion. With such a strong start to the 2025/26 tax year this is only going one way - and that is up.
"This is no accident – leaked government documents made it clear this week that inheritance tax is still seen as a cash cow by some members of the cabinet.
The government’s raids on historically IHT free investments and assets – like pensions, private company shares and AIM shares – create exactly the kind of uncertainty that puts people off making investments. The attack on the AIM market has been particularly egregious where uncertainty is concerned.