UK government borrowing since April hits £60bn
The UK government borrowed a total of £1.1bn last month, according to the Office for National Statistics (ONS), compared to £2.3bn last year and below the fiscal watchdog’s £2.6bn forecast.
The total deficit hit £60bn in the months since April, which is £6.7bn more than in the same four-month period of 2024 and the third-highest level since records began.
Total borrowing was around £100m higher than the OBR forecast. However, the cumulative current budget deficit, which is more critical to Chancellor Rachel Reeves’ fiscal rules, was some £5.7bn above estimates.
Government borrowing in June was £20.7bn, which was up by £6.6bn compared to the previous year.
Public debt has also increased over the last year to 96.1 per cent of UK GDP, while debt interest paid was £7.1bn.
Chief secretary to the Treasury Darren Jones said: “We’re investing in our public services, and modernising the state, to improve outcomes and reduce costs in the medium term.”
“Far too much taxpayer money is spent on interest payments for the longstanding national debt.
“That’s why we’re driving down government borrowing over the course of the parliament – so working people don’t have to foot the bill and we can invest in better schools, hospitals, and services for working families.”
Capital Economics’ Alex Kerr said tax data showing slightly higher receipts than expected, partly driven by an uptick in self-assessment income tax, did “little to brighten the gloomy outlook ahead of the Budget”.
“The government’s u-turns on spending cuts and potential upward revisions to the OBR’s borrowing forecasts mean the Chancellor may need to raise £17bn to £27bn at the Autumn Budget to maintain the £9.9bn of headroom against her fiscal mandate,” he said.
“Some of July’s undershoot in borrowing was driven by lower-than-expected spending, including on debt interest payments, which came in £1.5bn below the OBR’s forecast. But that may not last.
“Indeed, the rise in gilt yields since the Spring Statement may reduce the Chancellor’s headroom from £9.9bn to £5.5bn.”
Rachel Reeves faces OBR showdown
Office for Budget Responsibility (OBR) chiefs are likely to view government borrowing statistics in a negative light.
The office published a damning report in July warning public debt could rise from its current level of 95 per cent of GDP to 270 per cent of GDP in 50 years.
Its report suggested the UK could not afford the triple lock pension, while problems in balancing the costs of net zero with the impacts of climate change would further deteriorate public finances.
OBR chair Richard Hughes said politicians could “not afford the array of promises” they make to voters in successive elections.
The National Institute of Economic and Social Research (NIESR) suggested that the government faced having to fill a £50bn black hole with higher taxes due to lower growth forecasts, policy U-turns and the threat of borrowing costs inching higher.
Other City analysts have indicated that at least £10bn in taxes will have to be raised later this year.
Taxes on the agenda
According to reports, the Chancellor is considering a range of options to raise tax revenue. These include hiking taxes on property, pensions, and businesses.
These include a possible ‘mansion tax’ on the sale of houses above £1.5m. According to research, officials believe that a threshold of £1.5m would hit around 120,000 homeowners who are higher-rate taxpayers with capital gains tax bills of £199,973.
Colleen Babock, property expert at Rightmove, says it would “predominantly be a tax on the most expensive areas of London and the South East”.