UK posts surprise £1.8bn deficit ahead of Healey's first budget
Britain's government recorded an unexpected £1.8bn budget deficit in July, adding pressure on chancellor John Healey as he prepares his first budget in October.
The UK's public finances showed a £1.8bn deficit in July, confounding City economists who had forecast a break-even month — July typically benefits from a boost in receipts from self-assessment income tax payments.
The Office for National Statistics said that despite robust tax income, public sector borrowing still came in at £1.8bn for the month.
Over the first four months of the financial year, the cumulative deficit reached £56.7bn. While that is below last year's level, it runs £2.3bn above the forecast set by the Office for Budget Responsibility.
Total public debt stood at £2.98tn, equivalent to 94% of GDP, up £96bn from a year earlier — a rise consistent with the Labour government's strategy of borrowing to fund infrastructure investment.
A tougher budget outlook
Chancellor John Healey is due to deliver his first budget on 28 October. Officials expect the public finances to look weaker than they did at Rachel Reeves's spring statement in March, delivered just as the Iran war was beginning.
At that point Reeves had a £23.6bn cushion against her fiscal rules, but analysts warn that a large share of this headroom could be eroded by higher inflation, slower economic growth and rising bond yields.
Responding to the July figures, Healey said fiscal discipline underpins the UK's economic stability and national security, and reaffirmed the government's commitment to its fiscal rules while maintaining a buffer against global uncertainty. He added that Britain is cutting its deficit faster than any other G7 economy, while easing cost-of-living pressures and helping more young people into employment.
