UK borrowing rises as July deficit beats forecasts

What's happened

The Office for National Statistics shows July borrowing at £1.8bn, 68.7% higher than a year earlier, confounding expectations of a small surplus. For the first four months of the financial year, borrowing exceeds the OBR forecast, while debt nears £3 trillion amid fiscal discipline promises ahead of the October Budget.

What's behind the headline?

Key takeaways

• The government has announced a clearer picture of July's public finances, with borrowing at £1.8bn and debt at £2.985tn, near the £3tn milestone.
• The OBR had projected a £0 surplus, while receipts were boosted by self-assessment tax payments; spending on social benefits and other outlays rose, widening the gap.
• The four-month deficit stands at £56.7bn, above the OBR forecast, highlighting ongoing fiscal constraints.

What this signals

• The administration is under pressure to balance fiscal discipline with stimulus for growth, ahead of the October Budget.
• Markets and analysts will watch for how policy settings adapt to persistent deficits amid inflation and higher debt service costs.

Implications

• If July is indicative, the path to eliminating the deficit remains challenging, affecting investment and public services funding in the near term.

How we got here

July’s borrowing defies forecasts despite record tax receipts, underscoring a persistent fiscal challenge as the government faces its first Budget. The data broadens scrutiny of the new administration’s spending and fiscal rules in the face of inflation and growth pressures.

Our analysis

According to Independent, The Guardian and Reuters, July borrowing has surprised analysts; the OBR’s projections and Healey’s comments frame the deficit trajectory as Labour prepares for the October Budget.

Go deeper

• Will the August data confirm a trend or a temporary spike in July receipts?
• How will fiscal discipline be balanced against investment needs in infrastructure?
• What measures could the government take in the October Budget to reduce the deficit?

More on these topics

• Office for National Statistics

  The Office for National Statistics is the executive office of the UK Statistics Authority, a non-ministerial department which reports directly to the UK Parliament.

• John Healey - Shadow Secretary of State for Defence of the United Kingdom

  John Healey is a British Labour Party politician serving as Member of Parliament for Wentworth and Dearne, formerly Wentworth, since 1997 and Shadow Secretary of State for Defence since 2020.

• United Kingdom - Country in Europe

  The United Kingdom of Great Britain and Northern Ireland, commonly known as the United Kingdom or Britain, is a sovereign country located off the north­western coast of the European mainland.

• Office for Budget Responsibility - Non-departmental public body

  The Office for Budget Responsibility is a non-departmental public body funded by the UK Treasury, that the UK government established to provide independent economic forecasts and independent analysis of the public finances.

• Andy Burnham - Mayor of Greater Manchester

  Andrew Murray Burnham is a British Labour Party politician who has served as Mayor of Greater Manchester since 2017. He attended Gordon Brown’s Cabinet as Chief Secretary to the Treasury from 2007 to 2008 and served in the Cabinet as Culture Secretary f