The monthly public sector finances release for May 2025 published by the Office for National Statistics (ONS) on Friday 20 June 2025 reported a provisional deficit of £17.7bn for the month of May and £37.7bn for the two months then ended, £0.7bn and £1.6bn more respectively than the same periods a year ago.

Alison Ring OBE FCA CPFA, ICAEW Director of Public Sector and Taxation, said: “Borrowing was slightly better than expected in the first two months of the financial year, making the indicator a lonely amber light among the many red lights that are flashing with increasing rapidity on the government’s economic and fiscal dashboard. 

“The downbeat mood in 11 Downing Street will not have been helped by the increasing consensus that the national debt is too big, the economy too small and cost pressures too great for the Chancellor to avoid putting up taxes or relaxing her fiscal rules – or both – in the Autumn Budget later this year.

“While there is always a hope that tax rises can be kept to a minimum, we hope the Chancellor will take this opportunity to consult over the summer on a range of potential tax changes, even if they may not all be needed. It is time to end HM Treasury’s extremely bad habit of tinkering with the tax system with policies designed in haste in the run-up to each fiscal event.”

Month of May 2025

The deficit for May 2025 was £17.7bn, £0.6bn more than budgeted and £0.7bn more than a year previously. According to the ONS, this was the second-highest May deficit since monthly records began in 1993. 

Cumulative to May 2025

The deficit for April and May 2025 together was £37.7bn, £3.0bn less than budgeted and £1.6bn more than the same period last year, and the third-highest April to May deficit since monthly records began after 2020 and 2021 during the pandemic. 

The deficit can be analysed between a current deficit of £27.4bn, which was £0.3bn more than budgeted and £1.3bn lower than in the same period last year, and net investment of £10.3bn, which was £3.3bn less than budgeted and £2.9bn more than in April and May 2024.

Table 1 highlights how taxes and other receipts and total current spending in April and May 2025 of £182.3bn and £209.7bn were up 6% and 5% respectively compared with the same period last year. The rise in receipts reflected a significant increase in employer national insurance contributions from April this year and higher income tax receipts, in part from fiscal drag from the continued freeze in personal tax allowances. The rise in current spending was driven by increases in welfare benefits, public sector pay rises and higher supplier costs.

The fall in debt interest of £2.4bn to £22.7bn principally arose from a £2.2bn reduction in indexation on inflation-linked debt compared with last year due to lower inflation, with lower interest rates payable on variable and fixed-rate debt marginally offsetting a higher level of debt compared with a year ago.

Net investment of £10.3bn in April and May 2025 was up by £2.9bn or 39% compared with April and May 2024. This comprised capital expenditure of £14.9bn (up by £1.8bn or 14% from last year) and capital grants, student loan write-offs and other items of £7.4bn (up by £1.9bn or 35%) less depreciation of £12.0bn (up by £0.8bn or 7%). This reflects the planned increase in capital investment announced in the Autumn Budget 2024.

Table 1: Summary receipts and spending

Borrowing and debt

Table 2 summarises how the government borrowed £57bn during April and May 2025, comprising public sector net borrowing (PSNB) to fund the deficit of £38bn plus £19bn in net cash outflows for government lending activities and working capital movements.

The consequence was an increase in public sector net debt from £2,810bn on 31 March 2025 to £2,867bn on 31 May 2025. This is £1,051bn or 58% more than the £1,816bn on 31 March 2020 at the start of the pandemic.

Table 2 also illustrates how the debt to GDP ratio increased from 95.2% of GDP on 31 March 2025 to 96.4% on 31 May 2025 as a consequence of debt movements being partly offset by the ‘inflating away’ effect of inflation and economic growth increasing GDP, the denominator in the net debt to GDP ratio.

Table 2: Public sector net debt and net debt/GDP

Public sector net debt on 31 May 2025 of £2,867bn comprised gross debt of £3,270bn less cash and other liquid financial assets of £403bn. 

Public sector net financial liabilities were £2,496bn, comprising net debt of £2,867bn plus other financial liabilities of £706bn less illiquid financial assets of £1,077bn. Public sector negative net worth was £870bn, being net financial liabilities of £2,496bn less non-financial assets of £1,626bn.

Revisions and other matters

Caution is needed with respect to the numbers published by the ONS, which are repeatedly revised as estimates are refined and gaps in the underlying data are filled. This includes local government, where the numbers are only updated in arrears and are based on budget or high-level estimates in the absence of monthly data collection.

The latest release saw the ONS revise the reported deficit for the financial year ended 31 March 2025 up by £1bn from £148bn to £149bn, and revise reported net debt at the end of March 2025 up by £3bn from £2,807bn to £2,810bn.

For further information, read the public sector finances release for May 2025.