GBTT Data Release · Fiscal
This is not noise. Borrowing has now exceeded the OBR’s monthly profile in both April and May, and the spring forecast has started badly. May’s £23.3 billion is up 30.4% on last year and £5.6 billion above profile; two months in, borrowing runs £7.7 billion ahead. Debt interest of £11.7 billion is a record for any May, £4.9 billion of it pure RPI capital uplift on index-linked gilts. These figures do not erase the Chancellor’s headroom pound-for-pound — receipts are expected to be unusually back-loaded this year — but they leave far less room for the next adverse surprise. Two months do not make a trend. They do weaken the starting point.
May 2026 PSF · the headline numbers
The profile is slipping
Public sector net borrowing was £23.3 billion in May — £5.4 billion (30.4%) more than May 2025, and £5.6 billion above the OBR’s £17.7 billion forecast. With April’s overshoot included, borrowing in the financial year to May reached £46.3 billion against a profile of £38.6 billion — a £7.7 billion miss just two months into the year. The current budget deficit, the cleanest read on day-to-day fiscal health, hit £18.5 billion in May, taking the year-to-date deficit to £34.5 billion, £6.0 billion above the OBR’s trajectory.
The problem is on the spending side, not receipts. Central government receipts are only £0.9 billion below profile for the year to date; central government spending is £4.0 billion above it. The main upward contributions in May were £2.4 billion of additional debt interest, £1.1 billion of net social benefits and £1.2 billion of government consumption, partly offset by lower grants and other spending. The arithmetic is moving the wrong way, and it is being moved by what the state spends.
Debt interest is the story underneath
Central government debt interest reached £11.7 billion in a single month, the highest for any May on record. About £4.9 billion of that — roughly 42% — was RPI-linked capital uplift on index-linked gilts, driven principally by the 0.8% rise in RPI between February and March. The OBR attributes that inflation surprise largely to the energy price increases caused by the conflict in the Middle East.
This is a real accrued cost to the Exchequer, but it is a different kind of slippage to a spending decision — inflation arriving at the gilt desk with a lag. Post-QE, the gilt stock’s indexation share means every inflation surprise feeds directly into the deficit. The Treasury is, in effect, short inflation at exactly the moment the Bank is still trying to anchor it.
Why this matters
The OBR’s March forecast underpinned the Chancellor’s claim that headroom against the current-budget rule had risen to almost £24 billion. A £7.7 billion year-to-date overshoot does not reduce that headroom pound-for-pound — these figures remain provisional, and the OBR itself expects receipts to be unusually back-loaded this year, partly on new revenue from the Temporary Repatriation Facility. But it weakens the starting point, and net debt above 95% of GDP, running 0.7 percentage points above the March forecast, is a further adverse signal for gilt investors.
The monetary read-through is limited. Around £2.4 billion of the year-to-date spending overshoot is higher debt interest, the fiscal consequence of higher RPI rather than fresh demand. The MPC voted 7–2 on 18 June to hold Bank Rate at 3.75%, with two members preferring a rise to 4% on energy-driven inflation risks — so the debate has shifted from the pace of cuts towards whether the shock requires tighter policy. For households and businesses, the immediate implication is not fewer rate cuts; it is a greater risk of tighter fiscal policy — higher taxes or slower spending growth — at the next Budget. If the pattern persists through the summer, that choice gets harder. The bond market is patient, not blind.