Strong spending on public services and welfare pushed government borrowing to £3.1bn last month, more than double its level in the same month a year earlier and worse than experts had expected.
Fuelling the row between Labour and the Conservatives over the health of the public finances, the deficit was the highest for a July in three years and £3bn higher than expected by the government’s spending watchdog, the Office for Budget Responsibility.
The Office for National Statistics said strong growth in public spending was the main factor behind the borrowing overshoot.
Jessica Barnaby, the ONS deputy director for public sector finances, said: “July borrowing was almost £2bn higher this year than in 2023. Revenue was up on last year, with income tax receipts in particular growing strongly. However, this was more than offset by a rise in central government spending where, despite a reduction in debt interest, the cost of public services and benefits continued to increase.”
The UK’s public finances are typically strong in July, owing to the boost provided by income tax self-assessment returns. In 2023, the UK had to borrow £1.3bn in July to cover the gap between the state’s revenue and its spending.
Darren Jones, the chief secretary to the Treasury, said: “Today’s figures are yet more proof of the dire inheritance left to us by the previous government. A £22bn black hole in the public finances this year, a decade of economic stagnation, and public debt at its highest level since the 1960s, with taxpayers’ money being wasted on debt interest payments rather than on our public services.
“We are taking the tough decisions that are needed to fix the foundations of our economy, modernise our public services and rebuild Britain so we can put more money back into people’s pockets across the country.”
The July figures from the ONS mean that, in the first four months of the 2024-25 financial year, the UK borrowed a total of £51.4bn.
At the time of the former chancellor Jeremy Hunt’s March budget, the Office for Budget Responsibility said it expected borrowing for this financial year as a whole to be £87bn. The deficit is now £4.7bn higher than the OBR forecast.
The state of the public finances has become a hot political issue in the run-up to what the chancellor, Rachel Reeves, has admitted will be a tough budget on 30 October.
after newsletter promotion
Reeves said the previous government had given her the worst inheritance of any postwar chancellor, accusing the Conservatives of covering up a £22bn black hole.
Hunt, Reeves’s predecessor, has said that Labour inherited a growing and resilient economy, and that the chancellor was trying to find political cover for tax increases she had always intended before taking office.