UK Government Borrowing Overshoots Estimate

(RTTNews) - UK government borrowing in July exceeded the official estimate and also hit the highest for the month since 2021 due to the increase in public spending, data from the Office for National Statistics showed on Wednesday.

Public sector net borrowing increased GBP 1.8 billion from the previous year to GBP 3.1 billion in July. This was the highest July borrowing since 2021.

The Office for Budget Responsibility had estimated the budget deficit for July at GBP 0.1 billion and economists expected a level of GBP 1.5 billion.

Borrowing is generally low in July as accrued receipts are usually high because of receipts from self-assessed income taxes. Central government receipts grew by GBP 1.7 billion to GBP 91.0 billion.

At the same time, central government's total expenditure was GBP 107.4 billion in July, about GBP 3.5 billion more than in July 2023.

As the interest payable on index-linked gilts rises and falls with the retail prices index, the interest payable on central government debt fell by GBP 1.0 billion to GBP 7 billion. Nonetheless, this was the second highest interest payable in any July since 1997.

In the financial year to July, borrowing decreased 0.5 billion from the same period last year to GBP 51.4 billion.

However, this was the fourth highest year-to-July deficit since monthly records began in January 1993. Moreover, borrowing was more than the GBP 46.6 billion forecast by the OBR.

Excluding public sector banks, public sector net debt was estimated at 99.4 percent of GDP at the end of July. This was 3.8 percentage points more than at the end of July 2023.

Capital Economics' economist Alex Kerr said today's release highlights the tight fiscal backdrop that Chancellor Rachel Reeves faces ahead of her first Budget on October 30.

The economist said the chancellor will look to raise an additional GBP 10 billion a year via higher taxes in the Budget and increase borrowing by around GBP 7 billion a year.