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Both months have missed. April borrowing was revised to £23.0bn, approximately £2.1bn above the OBR’s £20.9bn profile; May came in at £23.3bn against a profile of £17.7bn. The miss was broad-based: central-government expenditure exceeded profile, receipts were weaker than forecast and borrowing elsewhere in the public sector was also higher. Debt interest of £11.7bn was the standout — a May record in nominal terms, with £4.9bn reflecting the RPI-linked capital uplift following a 0.8% RPI increase between February and March. The OBR’s full-year borrowing forecast is £115.5bn, while central-government debt interest, net of the APF, is forecast at £109.4bn in 2026–27. That number remains acutely sensitive to persistent inflation and sustained increases in refinancing yields.

The stable headline concealed a sharp divergence. Goods inflation fell from 2.4% to 2.0%, with weakness across non-energy industrial goods and food-related categories. Services did the opposite: 3.2% in April became 3.7% in May, driven by travel and transport, particularly air and sea fares, with Easter timing affecting the year-on-year comparison. Part of this move may reverse. But services disinflation has repeatedly proved uneven, core CPI is still edging up, and the May data gave the doves on the MPC very little to work with.

The public/private split is the number that matters most in this release. Private-sector regular pay grew 2.9%, slightly below average CPIH inflation of 3.2% over the same period. Whole-economy regular pay growth of 3.4% was lifted by public-sector growth of 5.1%, which was partly affected by the timing of NHS pay awards. On its face, private-sector pay was below the Bank’s estimates of target-consistent wage growth, although an industry-mix adjustment adds around half a percentage point. Vacancies fell to 707,000, the lowest since February to April 2021, adding to the evidence of gradual labour-market loosening. The Bank received these figures as exceptional pre-release data from 8:30am on Monday 15 June, ahead of the MPC meeting.

Megan Greene joined Huw Pill in voting for an immediate 25bp rise — Pill had been the sole hawkish voice in April. The majority held because underlying disinflation appeared to remain intact, financial conditions had tightened, and weakness in activity and the labour market reduced the risk of second-round effects. The dissenters pointed to services inflation at 3.7% and the risk of second-round price pressure becoming embedded. The bar for a July cut has risen materially, although the decision remains contingent on energy prices, services inflation and evidence of second-round effects. Next decision: Thursday 30 July 2026.

Read May in context of April. The initial April release showed volumes fell 1.3%; the revised figure is −1.0%, making May’s bounce partly a recovery from a sharp decline. Non-store retail volumes rose 6.1% and warm weather lifted department stores; the headline beat the 0.5% consensus comfortably. Unchanged consumer confidence at −23, private-sector real wages slightly negative, and higher employment costs still weighing on the broader outlook: one month does not change the underlying demand picture.

A 59% turnout and a majority 70% larger than Labour’s 2024 margin in the same seat is strong evidence of a substantial personal vote. On polling day, reports emerged that Richard Hughes — former OBR chairman — was among the economists advising Burnham on fiscal credibility. Gilts sold off sharply on Friday as borrowing data and political news arrived together. The fiscal arithmetic is unforgiving whoever holds the keys: income tax, VAT and employee NI are ruled out; the employer NI lever has been pulled; defence requires tens of billions more; welfare is one of the few remaining levers — and his instincts run the wrong direction on it.

Gilts rallied through the middle of the week as ceasefire news in the Middle East eased oil prices. That reversed sharply on Friday when the borrowing data and Burnham’s result arrived together.