UK borrows more than expected in July as Healey prepares for first Budget
Chancellor John Healey said the government is 'committed to meeting our fiscal rules'
The UK government's borrowing in July surpassed projections, according to new data released as Chancellor John Healey prepares his inaugural Budget.
With Healey and Prime Minister Andy Burnham anticipated to introduce measures aimed at alleviating household cost-of-living pressures, the Office for National Statistics (ONS) reported that borrowing exceeded official forecasts by £2.3 billion.
The July borrowing figure, representing the difference between government expenditure and tax revenue, stood at £1.8 billion, marking a two-thirds increase compared to the same month last year.
Economists cautioned that this figure will limit Healey's flexibility, leaving minimal room to increase borrowing in the Budget scheduled for October 27.
Healey has emphasized his commitment to "strong fiscal discipline" in the upcoming Budget, which will constrain government spending. He has adopted the fiscal rules of his predecessor, Rachel Reeves, which mandate that all day-to-day government spending be funded by tax receipts by the end of the decade.
Responding to the borrowing figures, Healey stated, "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."
The government borrowed £16 billion less in July than in June, partly due to a surge in self-assessed income tax receipts. However, the figure was higher than anticipated due to increased welfare spending, including benefits and other payments such as the state pension. Social payments were £2 billion higher than in the same period last year.
The ONS reported that borrowing from April to July, the first four months of the government's fiscal year, reached £56.7 billion. While lower than last year, this is £2.3 billion higher than the forecasts from the Office for Budget Responsibility (OBR), which the government uses for its spending plans.
Ashley Webb, a senior economist at Capital Economics, commented that the figure continues a "run of bad news" for the economy and that "there will be little scope to raise borrowing in the Budget later this year." He added that the borrowing overshoot "will probably get bigger" this year as economic growth slows and the government implements more measures to support households with the cost of living.
The ONS also indicated that Britain's total debt pile is nearing £3 trillion, having increased by £127.2 billion over the past year. The Conservatives criticized Labour's spending, asserting it would leave "ordinary families" to bear the cost.
Shadow Chancellor Mel Stride remarked, "We spend more on just the interest of our soaring debt than we do on our defence, police, and prisons combined. We simply cannot afford the price of Labour."