Emeritus Professor Joe Nellis is economic adviser at MHA, the accountancy and advisory firm.

The June public sector borrowing data provides an early warning to the new Prime Minister and his incoming Chancellor, John Healey, of the scale of the challenge ahead. Borrowing came in at £16 billion, underscoring the harsh reality that the government's financial position remains under severe strain. With the economy failing to grow at great pace, we are not seeing any meaningful improvement in public-sector finances.

There is a persistent gap between government spending and tax revenue. Ongoing and rising spending pressures on the NHS, social care, defence and welfare continue to strain public expenditure. At the same time, interest payments on the national debt remain historically high. With the new administration committed to maintaining the current fiscal rules, there is little room for policy flexibility or for expensive new commitments.

Delivering on promises to improve public services, invest in infrastructure, and support living standards will require difficult, potentially unpopular choices. Stronger, sustainable economic growth would be a welcome boost to tax revenues, but growth alone will not put public finances right quickly enough.

Tough decisions on taxation, government spending, or both are becoming increasingly difficult and impossible to avoid. Any honeymoon period for the new Prime Minister and his Chancellor will be short-lived.

Looking ahead, government borrowing is expected to remain uncomfortably high for the rest of this financial year. Unless economic growth strengthens or spending pressures ease sharply, borrowing is likely to exceed acceptable levels. Financial markets will remain nervous and will therefore continue to scrutinise the government's commitment to fiscal discipline, particularly as investors remain sensitive to any signs that borrowing could drift higher.

The challenge for Andy Burnham and Chancellor John Healey is to strike the right balance between supporting economic growth initiatives and restoring confidence in the public sector's finances.

The latest borrowing figures mark an early test of the government's economic credibility and a reminder that rebuilding Britain's public finances is likely to be one of this Parliament's defining tasks.