UK public sector borrowing higher than expected in July

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The UK government borrowed more than expected in July, according to official data that highlights the budget challenges facing the Labour chancellor Rachel Reeves.

Borrowing — the difference between public sector spending and income — was £3.1bn in July, £1.8bn more than in the same month in 2023 and the highest July level since 2021, the Office for National Statistics said on Wednesday.

The figure was also much higher than the £0.1bn forecast by the Office for Budget Responsibility, the UK fiscal watchdog, and the £1.5bn predicted by economists polled by Reuters.

The data underscores the challenge for the Labour government to fund its agenda amid soaring levels of debt.

Earlier this month, Reeves left the door open for more borrowing ahead of her first Budget on October 30, after the government identified a “fiscal hole” of £22bn of unfunded spending commitments.

“Today’s figures are yet more proof of the dire inheritance left to us by the previous government,” said Darren Jones, chief secretary to the Treasury, on Wednesday.

“We are taking the tough decisions that are needed to fix the foundations of our economy,” he added.

In the first four months of the fiscal year to June, borrowing was £51.4bn. That was £0.5bn less than the figure for the same four months last year, but £4.7bn more than forecast by the OBR.

Public debt, or borrowing accumulated over time, was 99.4 per cent of GDP, remaining at levels last seen in the early 1960s, due to higher spending during the Covid-19 pandemic.

ONS deputy director for public sector finances Jessica Barnaby said that while revenue had increased from last year, “this was more than offset by a rise in central government spending”, noting that the cost of public services and benefits had continued to increase.