The UK borrowed an unexpected £1.8 billion in July, leaving the public finances £2.3 billion worse than forecast for the month and adding to the pressure on Chancellor John Healey before his first Budget.
Figures from the Office for National Statistics show public sector net borrowing was £700 million higher than in July 2025. The Office for Budget Responsibility had forecast a £500 million surplus.
July often produces stronger public finances because it is one of the main months for self-assessment income tax payments. Those receipts reached a record £17.1 billion this July, but increased government expenditure outweighed the additional revenue.
Spending rises faster than receipts
Total current central government receipts reached £104.3 billion, an increase of £4.6 billion compared with July last year. Central government expenditure rose by a larger £5.7 billion to £110.7 billion.
Social benefit payments were £2 billion higher than a year earlier, while spending on goods and services increased by £1.2 billion. Debt interest costs rose by £700 million to £7.7 billion.
The ONS said spending growth had outpaced receipts despite strong self-assessment income tax revenue.
The wider picture is less severe
Although the monthly result was substantially worse than forecast, the cumulative position offers a more balanced picture.
Borrowing between April and July stood at £56.7 billion. That was £6 billion, or 9.6 per cent, lower than during the same four months last year, but remained £2.3 billion above the OBR's forecast.
The ONS cautions that monthly borrowing estimates can be volatile and subject to revision. It says year-to-date comparisons generally provide a more reliable indication of the underlying trend.
The current budget, which excludes capital investment and measures whether receipts cover day-to-day spending, recorded a £3.1 billion surplus in July. Across the financial year to July, however, the current budget remained £37.5 billion in deficit.
Debt remains close to £3 trillion
Public sector net debt was provisionally estimated at £2.985 trillion at the end of July, equivalent to 94.1 per cent of gross domestic product.
The cash amount was £95.9 billion higher than a year earlier, although debt as a proportion of the economy was 0.8 percentage points lower.
Healey said the Government remained committed to its fiscal rules and maintaining a buffer against international uncertainty. He also argued that Britain was reducing its deficit faster than other G7 economies while providing cost-of-living support.
Pressure before the October Budget
The Chancellor will deliver the Budget on Wednesday 28 October, accompanied by a new set of economic and fiscal forecasts from the OBR.
One disappointing month does not determine the Budget arithmetic, particularly when borrowing remains lower than last year across the financial year to date. However, the overshoot against the official forecast illustrates the limited room available for unfunded spending commitments or tax reductions.
The size of Healey's eventual room for manoeuvre will depend on the OBR's updated projections for economic growth, tax receipts, inflation, borrowing costs and government spending.