Borrowing surge as Labour spending spree and Iran crisis outweighs tax

See more Daily Mail on Google - save us as a Preferred SourceBy JAMES TAPSFIELD, UK POLITICAL EDITOR Published: 07:38 BST, 22 May 2026 | Updated: 08:10 BST, 22 May 2026

Brits face the threat of tax hikes whoever wins the Labour leadership struggle as grim figures showed Government borrowing surging.The public sector racked up £24.3billion of borrowing last month, the highest April level on record outside of the Covid peak.Spending far outstripped revenues as the Iran crisis drove the cost of servicing the UK's debt mountain to £10.3billion – nearly a billion pounds more than a year ago.The stark picture emerged as Labour hopefuls pitch to the party's Left as they jostle to take over from Keir Starmer. Wes Streeting sparked fury yesterday by demanding a 'wealth tax' targeting income from shares and investments.Economists warned it would actually reduce tax income rather than raise the £12billion he claims. The public sector racked up £24.3billion of borrowing last month, the highest April level on record outside of the Covid peak Spending far outstripped revenues as the Iran crisis drove the cost of servicing the UK's debt mountain to £10.3billion – nearly a billion pounds more than a year ago Andy Burnham has previously backed an increase in the top rate of tax Wes Streeting sparked fury yesterday by demanding a 'wealth tax' targeting income from shares and investmentsHowever, even if there is no change in No10 there is rising concern that taxes will have to go up again to balance the books. Chancellor Rachel Reeves has already pushed the tax burden towards a never-before seen peak. ONS Chief Economist Grant Fitzner said: 'Borrowing this month was substantially higher than in April last year and although receipts increased compared with April 2025, this was more than offset by higher spending on benefits and other costs.'Borrowing for the latest full financial year was revised down slightly, and on a comparable basis remains the lowest since the year ending March 2020.'Rob Wood, chief UK economist at Pantheon Macroeconomics, said: 'We estimate that debt interest costs in 2026-27 will be about £15billion higher than assumed in the budget if gilt yields hold at current levels for the rest of the year.'Headroom against the fiscal rules would be cut by closer to £10billion if half the rise in yields since the budget is sustained until 2029-20.'As best we can tell, political risk has added 20 to 40 basis points to gilt yields and we suspect will keep borrowing costs more elevated than they otherwise would be this year.'