July figures come amid row between Labour and Conservatives over true state of public finances
The government borrowed £3.1 billion last month, more than twice as much as it did the same month last year and more than double what analysts had predicted due to heavy expenditure on welfare and public services.
The deficit was £3 billion larger than anticipated by the government's spending watchdog, the Office for Budget Responsibility, and it was the most for a July in three years, which fueled the dispute between Labour and the Conservatives over the state of the public finances.
According to the Office for National Statistics, the primary cause of the borrowing overrun was rapid increases in governmental spending.
Jessica Barnaby, the ONS deputy director for public sector finances, said: “July borrowing was almost £2bn 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 UK’s public finances are typically strong in July, owing to the boost provided by income tax self-assessment returns. In 2023, the UK had to borrow £1.3bn in July to cover the gap between the state’s revenue and its spending.
Darren Jones, the chief secretary to the Treasury, said: “Today’s figures are yet more proof of the dire inheritance left to us by the previous government. A £22bn 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.”
The July figures from the ONS mean that, in the first four months of the 2024-25 financial year, the UK borrowed a total of £51.4bn.
At the time of the former chancellor Jeremy Hunt’s March budget, the Office for Budget Responsibility said it expected borrowing for this financial year as a whole to be £87bn. The deficit is now £4.7bn higher than the OBR forecast.
The state of the public finances has become a hot political issue in the run-up to what the chancellor, Rachel Reeves, has admitted will be a tough budget on 30 October.