The UK government borrowed £1.8bn in July, £2.3bn more than the Office for Budget Responsibility had forecast, official figures show. The overshoot narrows chancellor John Healey's room to manoeuvre ahead of his first Budget, while the pound held close to $1.36 against the dollar.
The Office for National Statistics said government borrowing came in at £1.8bn in July, against a forecast surplus of £500m. That leaves Chancellor John Healey with less space to ease cost-of-living pressures before his first Budget.
Borrowing overshoots forecast
Officials had expected a surplus, so the gap between forecast and outturn reached £2.3bn. The deficit was also £700m higher than the same month a year earlier, even though self-assessed income tax receipts rose almost 10% on July last year. Spending growth outpaced that gain, with central government social benefits spending up £2bn on the same month last year, driven partly by inflation-linked payment increases. Cumulative borrowing for the first four months of the fiscal year reached £56.7bn, £2.3bn above the OBR's forecast.
Pound steady against the dollar
Sterling showed little reaction to the data. The pound rose 0.12% to $1.364 on the day, even as the borrowing figures added to pressure on the chancellor.
Fiscal headroom narrows before October
Healey said: "We are cutting the deficit faster than any other G7 economy", adding that the government was still targeting support for young people and cost-of-living relief. According to the BBC, Capital Economics's Ashley Webb said the overshoot would probably get bigger this year as growth slows. Separately, the Resolution Foundation's Elliott Christensen said the chancellor's margin against his fiscal rules was likely to have fallen below £8bn, down from about £24bn last spring. Total public debt is now £2,985bn, or 94% of GDP, up £96bn on a year earlier.
Retail sales also fell, dropping 0.5% in July after a 0.7% rise in June, as hot weather and a World Cup boost to June sales faded. Healey now heads into the Budget on 27 October with little scope to loosen the purse strings.
Sources: BBC News, Financial Times, The Guardian
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