The latest UK Public Sector Finances statistics will add increased pressure on Chancellor Rachel Reeves as the government battles to rein in spending.
The Office for National Statistics has put July’s borrowing figure at £1.1 billion, which is down from the year before, in what is a usually low month for public sector borrowing.
However, borrowing in the financial year to July was £60 billion, £6.7 billion higher than last year and the third-highest April-July borrowing since monthly records began.
Although July typically sees higher receipts due to self-assessed taxes, revenues still rose sharply, up £9.2bn compared to July 2024.
Debt interest payments reached £7.1 billion in July, £200 million more than in July 2024. Higher debt servicing costs as a share of total revenues will leave the public finances more exposed to future economic shocks.
“Although tax receipts rose in July, the Chancellor remains under pressure as she tries to balance weak growth with the fiscal rules she has committed to,” said Nabil Taleb, Economist at PwC UK.
While the government’s manifesto promises to maintain investment and shield working people from tax hikes, analysis from NIESR suggests up to £40 billion in additional revenue may be needed to restore headroom and maintain investor confidence in the UK’s public finances, he said.
“As the Chancellor prepares for the Autumn Budget, the challenge will be finding creative sources of revenue while treading carefully around the impact on living standards.”
With debt interest already at massive levels, additional borrowing will be difficult, and unless the fiscal rules are changed, tax rises are inevitable. Reeves said the Budget of last year would not need to be repeated, but it has become clear that additional taxes are coming.
Today’s figures show that the government is going to be forced to become more creative in its tax gathering methods if it doesn’t want to break its manifesto promise of no tax rises on working people or breach the fiscal rules.
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