UK government borrows more than expected
The UK’s public finances improved in July after a particularly weak reading in June, but the government still borrowed more than its fiscal watchdog had expected over the course of the month.
Public sector net debt stood at £4.9bn last month, an improvement of £800m compared to July 2021 and much better than the £20.9bn deficit in June.
But the drop between June and July was expected as the government didn’t have high debt-interest bills to pay last month, and the level of loans was still £200m higher than forecast by the Office for Budget Responsibility.
Ministers will be pleased that tax receipts held up well as the government collected £78.2 billion in revenue in July, up £6.1 billion from a year earlier.
However, credit is still expected to rise as a whole in the year 2022-23, as high inflation has significantly increased the cost of index-linked government debt.
Chancellor Nadhim Zahawi said high inflation “put pressure on public finances by driving up the amount we spend on interest on debt”.
The Treasury warned against taking too much comfort in the stronger data in July compared to June, as there would be significant volatility in monthly data at a time of high inflation.