The UK government ran a larger than expected £۱.۸bn deficit in July, underlining the challenges facing the chancellor, John Healey, as he draws up his first budget.
City economists had expected a shortfall of zero for July, a month when Treasury receipts tend to be swollen by self-assessment income tax payments.
However, the Office for National Statistics said despite strong tax receipts, public sector borrowing last month was £۱.۸bn.
In the first four months of this financial year, the cumulative deficit was £۵۶.۷bn – lower than last year but still running £۲.۳bn ahead of the Office for Budget Responsibility forecast.
Total public debt was £۲.۹۸tn, or ۹۴% of GDP – up £۹۶bn on a year earlier – in line with Labour’s plan to borrow for investment in infrastructure projects.
Healey will announce his budget on ۲۸ October. The public finances are expected to be gloomier than forecast at Rachel Reeves’s spring statement in March, when the Iran war had only just begun.
At that time, Reeves had a generous £۲۳.۶bn buffer, or headroom, against her fiscal rules, but analysts believe a significant proportion of that may be eaten away by higher inflation, slower growth and rising bond yields.
In response to July’s public finances, Healey said: “Fiscal discipline is the bedrock of our UK economic stability and national security, which is why we are committed to meeting our fiscal rules, with a buffer against global uncertainties.
after newsletter promotion
“We are cutting the deficit faster than any other G۷ economy, while giving people a bit of breathing space with cost of living pressures and focusing support to get young people into work.”
