Introduction: UK borrowing hits £3.1bn in July
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
The health, or unsoundness, of Britain’s public finances is a key issue for Westminster and the City of London, with a painful autumn budget looming.
And the latest public finances data, just released, shows that the UK borrowed more than twice as much as economists expected last month to balance the books.
Public borrowing hit £3.1bn in July, which is £1.8bn more than in July 2023. It’s the highest July borrowing since 2021 (when the Covid-19 pandemic drove up spending and hit tax revenues).
City economists had expected lower borrowing, of £1.5bn.
Crucially, the fiscal watchdog, the Office for Budget Responsibility, had estimated the UK would only need to borrow £100m in July – which is typically a strong month for tax receipts, such as income tax self-assessment returns.
So, the black hole in the public finances which chancellor Rachel Reeves warned of in July has just got deeper.
Although the tax take increased in July, this was more than wiped out by higher government spending.
ONS deputy director for public sector finances, Jessica Barnaby, explains:
“July borrowing was almost £2 billion 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 ONS has also revised some of its earlier public finances data, which has reduced its estimate of borrowing since April by £1.5bn,. It now estimates the UK has borrowed £51.4bn so far this financial year.
That’s £500m less than was borrowed in the same four months last year, but £4.7bn more than the £46.6 billion forecast by the OBR for this period.
This increase in borrowing intensifies the pressure on Rachel Reeves to make tough decisions in her first fiscal event, this autumn.
As the Guardian reported last night, the chancellor is planning to raise taxes, cut spending and get tough on benefits in October’s budget as she tries to fill a substantial black hole in the public finances – despite stronger than expected growth in the first half of 2024.
Reaction to follow….
The agenda
-
7am BST: UK public finances for July
-
9am BST: South Africa’s inflation report for July
-
Noon BST: US weekly mortgagea approvals data
-
3.30pm: EIA to release US crude oil inventory data
-
7pm: Minutes of July’s Federal Reserve interest-rate setting meeting released
Key events
Digging into July’s public finances, we can see that higher tax receipts lifted central government’s income to £91.0bn in July – £1.7bn more than in July 2023.
Tax receipts increased by £2.1bn to £71.2bn, including a £1.7bn increase in income tax receiptes, £300m more in corporation tax, and £200m of VAT.
But, there was a £1.1bn drop in “compulsory social contributions”, to £13.8bn, due to the reductions in the main rates of National Insurance made by former chancellor Jeremy Hunt.
Self-assessment tax receipts rose by £1.1bn year-on-year to £12.9bn. However, that’s £700m less than the OBR had forecast (one reason the deficit was much higher than the £100m expected by the fiscal watchdog).
Darren Jones: We’ve been left with a dire inheritance
The jump in UK government borrowing last month shows the “dire inheritance” left by the previous government, says chief Secretary to the Treasury Darren Jones:
“Today’s figures are yet more proof of the dire inheritance left to us by the previous government.
“A £22 billion 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.”
Introduction: UK borrowing hits £3.1bn in July
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
The health, or unsoundness, of Britain’s public finances is a key issue for Westminster and the City of London, with a painful autumn budget looming.
And the latest public finances data, just released, shows that the UK borrowed more than twice as much as economists expected last month to balance the books.
Public borrowing hit £3.1bn in July, which is £1.8bn more than in July 2023. It’s the highest July borrowing since 2021 (when the Covid-19 pandemic drove up spending and hit tax revenues).
City economists had expected lower borrowing, of £1.5bn.
Crucially, the fiscal watchdog, the Office for Budget Responsibility, had estimated the UK would only need to borrow £100m in July – which is typically a strong month for tax receipts, such as income tax self-assessment returns.
So, the black hole in the public finances which chancellor Rachel Reeves warned of in July has just got deeper.
Although the tax take increased in July, this was more than wiped out by higher government spending.
ONS deputy director for public sector finances, Jessica Barnaby, explains:
“July borrowing was almost £2 billion 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 ONS has also revised some of its earlier public finances data, which has reduced its estimate of borrowing since April by £1.5bn,. It now estimates the UK has borrowed £51.4bn so far this financial year.
That’s £500m less than was borrowed in the same four months last year, but £4.7bn more than the £46.6 billion forecast by the OBR for this period.
This increase in borrowing intensifies the pressure on Rachel Reeves to make tough decisions in her first fiscal event, this autumn.
As the Guardian reported last night, the chancellor is planning to raise taxes, cut spending and get tough on benefits in October’s budget as she tries to fill a substantial black hole in the public finances – despite stronger than expected growth in the first half of 2024.
Reaction to follow….
The agenda
-
7am BST: UK public finances for July
-
9am BST: South Africa’s inflation report for July
-
Noon BST: US weekly mortgagea approvals data
-
3.30pm: EIA to release US crude oil inventory data
-
7pm: Minutes of July’s Federal Reserve interest-rate setting meeting released
