UK borrows more than expected in July as Healey prepares for first Budget

The UK government borrowed more than anticipated in July, presenting a challenge for Chancellor John Healey as he prepares his first Budget. Figures released by the Office for National Statistics (ONS) revealed that borrowing was £2.3 billion higher than projected by the Office for Budget Responsibility (OBR).

Overall borrowing for July stood at £1.8 billion, marking a significant increase of two-thirds compared to July of the previous year. This figure, representing the gap between government spending and tax revenues, has raised concerns among economists. They suggest it will limit the maneuverability of Healey and Prime Minister Andy Burnham as they aim to implement measures to alleviate the cost of living pressures on households.

Healey has committed to maintaining "strong fiscal discipline" in the upcoming Budget on October 27. He is adhering to his predecessor's fiscal rules, which mandate that all day-to-day spending must be covered by tax receipts by the end of the decade. Despite this commitment, the government borrowed £16 billion less in July than in June, partly due to a surge in self-assessed income tax receipts.

However, increased welfare spending, including benefits and state pension payments, contributed to the higher-than-expected borrowing. Social payments were £2 billion higher than in the same period last year. From April to July, the first four months of the fiscal year, government borrowing reached £56.7 billion. This total is lower than last year but exceeds OBR forecasts by £2.3 billion. Senior economist Ashley Webb noted this continues a "run of bad news" for the economy, predicting the borrowing overshoot could worsen as economic growth slows and the government introduces more cost-of-living support measures. The ONS also reported that Britain's total debt is approaching £3 trillion, having grown by £127.2 billion in the past year.

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We are cutting the deficit faster than any other G7 economy, while giving people a bit of breathing space with cost of living pressures and focusing support to get young people into work.