- Public sector borrowing was £1.8 billion in July – 68.7% higher than the same month last year
- Self-assessment income tax receipts up £1.7 billion to £17.1 billion – the highest for the month since records began
- Public sector net debt now £2.98 trillion – up £95.9 billion on last year
Danni Hewson, AJ Bell head of financial analysis, comments on the latest public sector finance figures:
“If the new chancellor needed any reminder of the tight rope he will have to walk when he steps up to the dispatch box at the end of October, today’s borrowing figures delivered that in spades.
“Despite self-assessment tax receipts hitting a record high for the month, borrowing shot up by a surprising 68.7% in July, compared to the same month last year, as the government continued to spend more than it brings in.
“July is often the month when the government books a tidy surplus and that’s what economists and the OBR had expected. Despite the increased take from VAT, Corporation Tax, NI contributions and Income Tax, pressures including increased benefit spend and debt interest costs gobbled away all the extra cash and a bit more.
“The 0.2% jump in RPI between April and May added £1.3 billion to the interest payable in July and current turmoil in global bond markets will make for uncomfortable reading at the Treasury.
“There is huge competition for cash as AI hyperscalers look to raise eyewatering amounts to kit out data centres and increase chip production, whilst governments battle with their own budget needs as defence spend continues to be a huge priority as well as day to day inflationary pressures that impact government budgets as well as those of households.
“High demand means investors can demand more for their investment and that’s keeping long term government borrowing costs elevated both in the UK and globally.
“For John Healey it means he’s going to have to work on some fancy footwork if he’s going to deliver the kind of feel-good budget the country is clamouring for if it’s going to invest and grow.
“And that means months of speculation which in previous years have resulted in businesses and households simply pressing pause on their spending plans as they wait to see how bad things might get.
“The new PM has been enjoying his honeymoon period, with the good weather contributing to a boost in consumer confidence, but the realities of rising inflation could quickly undermine that confidence especially once the heating needs to be turned on.”
