UK borrows more than expected in July as Healey prepares for first Budget

UK borrowing exceeded forecasts in July as Chancellor John Healey prepares his inaugural Budget. The Office for National Statistics (ONS) said borrowing was £2.3bn more than Office for Budget Responsibility (OBR) projections. Borrowing, the gap between government spending and tax receipts, stood at £1.8bn in July, two‑thirds higher than the same period last year. Economists warned the figure will limit Healey and Prime Minister Andy Burnham’s room to manoeuvre as they design measures to ease household cost‑of‑living pressures, with little scope to increase borrowing ahead of the 27 October Budget. Healey has said he will oversee “strong fiscal discipline” at the Budget, which will constrain how much the government can spend. He has adopted his predecessor Rachel Reeves’ fiscal rules, which require the government to fund day‑to‑day spending from tax receipts by the end of the decade. In response to the borrowing data, Healey stated: “We are cutting the shortage faster than immoderate different G7 economy, portion giving radical a spot of breathing abstraction with outgo of surviving pressures and focusing enactment to get young radical into work.” The government borrowed £16bn less in July than it did in June, a decline helped by a surge in self‑assessed income tax receipts. Nevertheless, the July figure came in higher than expected owing to increased payment spending, including benefits and the state pension; social payments were £2bn higher than the same period last year. The ONS reported that borrowing from April to July, the first four months of the fiscal year, reached £56.7bn. This is lower than the previous year but £2.3bn above the OBR forecast used when drafting spending plans. Senior economist Ashley Webb of Capital Economics said the figure continued a “run of atrocious news” for the economy and that “there will be small scope to rise borrowing in the Budget early this year”. He added that the borrowing overshoot “will most likely get bigger” this year as economic growth slows and the government rolls out further measures to support households with the cost of living. Joe Nellis, head of economic research at accountancy MHA, also said the figures will not “prevent hard decisions that must be made in the upcoming October Budget”. Healey will need to find “additional taxation revenue, tighter power implicit nationalist assemblage spending and changes elsewhere” to balance the books and meet the government’s fiscal rules. Nellis warned: “Failure to do so will unsettle the fiscal markets and possibly drive up the cost of government borrowing further.” The ONS noted Britain’s total indebtedness heap is approaching £3tn, having grown by £127.2bn a year earlier. The Conservatives argued Labour’s spending would leave “ordinary families” near to cover the bill. Shadow Chancellor Mel Stride remarked: “We walk much connected just the involvement of our soaring indebtedness than we bash connected our defence, police, and prisons combined. We simply cannot spend the terms of Labour.” The ONS also said retail income were lacklustre in July, falling 0.5% from June. Analysts attributed the dip to a surge of blistery upwind and a World Cup‑induced income surge in June, with clothing and footwear showing the slowest growth since May last year.