UK government borrowing in July was reported at £1.1 billion, which is £2.3 billion lower than the same month last year, according to the Office for National Statistics (ONS). This figure marks the lowest borrowing for July in three years and can be attributed to an increase in tax and National Insurance receipts, particularly self-assessed income tax payments.
Despite this decrease, analysts suggest that Chancellor Rachel Reeves may still need to raise taxes in the upcoming autumn Budget to align with her tax and spending rules. Borrowing for the first four months of the financial year reached £60 billion, representing an increase of £6.7 billion compared to the previous year. Notably, this figure aligns with forecasts from the Office for Budget Responsibility (OBR) made in March.
In July, income tax receipts increased by £4.5 billion, coinciding with a rise in National Insurance contributions, which were adjusted upwards earlier in the year. Economic experts note that while July’s borrowing figures appear favorable, they do not alleviate the challenges facing the Chancellor regarding future fiscal policies. For instance, chief UK economist Paul Dales from Capital Economics highlighted a potential shortfall in meeting fiscal rules, estimating a gap of around £17 billion.
The Chancellor has set two primary fiscal goals: ensuring that day-to-day government expenses are covered by tax income rather than borrowing, and reducing national debt as a share of income by the end of the current parliament in 2029-2030. However, opinions indicate that the longer-term outlook for public finances remains tough, with some estimates suggesting a fiscal shortfall of approximately £26.2 billion. Treasury Chief Secretary Darren Jones expressed concerns about the level of taxpayer money used for interest payments on national debt and emphasized the government’s goal of reducing borrowing.
Source: https://www.bbc.com/news/articles/cj6ydlk4e1no?at_medium=RSS&at_campaign=rss