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Martin Beck, chief economist at WPI Strategy, has warned that the underlying picture of the UK public finances “remains uncomfortable”, even if the US-Iran deal helps to ease inflation.

The deficit is still large, debt interest is still absorbing a painful share of revenue, and the tax burden is already heading for post-war highs. There is no easy escape route through either borrowing or taxation.

“That is why Andy Burnham’s by-election victory matters for the public finances. It does not change the arithmetic overnight, but it changes the politics around the arithmetic. A serious Labour leadership challenge would raise a simple question for markets: is the governing party about to shift towards higher spending, looser fiscal rules and a more relaxed attitude to borrowing?

A Burnham premiership might change the language of economic policy, but it would not abolish the arithmetic. The next Labour leader, whoever it is, will still face the same brutal equation: weak growth, high borrowing, expensive debt and very little room for manoeuvre.”

Public sector net borrowing came in at £23.3bn in May, showing the continuing pressure on the UK’s public finances and the difficult choices that lie ahead for the government and the Treasury for the rest of this financial year.

Borrowing in May was only slightly below the exceptionally high level recorded for April, remaining very high by historical standards. The latest data once more highlight the difficulty of balancing public-sector spending requirements with the government’s pledge to keep public finances on a sustainable path.