The Office for National Statistics reports this morning that public sector net borrowing in July came in at £4.3 billion. This is the fifth-highest July borrowing month since records began, with an additional £3.4 billion being spent to fund the government’s spending pledges compared to July last year.
Still, there is fast talk of room for manoeuvre for Chancellor Jeremy Hunt to spend more or cut tax, as cumulative government borrowing continues to undershoot the Office for Budget Responsibility's (OBR) latest forecast for the fiscal year. In July, borrowing reached £56.6 billion, £11.3 billion less than had been expected by this point.
In the Chancellor’s response to the figures this morning, the Treasury notes that it is ‘on track to get debt falling’ as per one of the prime minister’s five promises at the start of the year. This is because the government is still expected to ‘meet the debt to GDP fiscal rule in 2027-28 with headroom of £6.5 billion'.
Are there really grounds for such optimism? While the government may be borrowing less this fiscal year than originally anticipated, it has still managed to spend an additional £13.7 billion more than it did over the same four months as last year. The Treasury would have borrowed more if it didn’t have a policy of grabbing more taxpayer cash. Self-assessment tax payments in July rose to £11.8 billion – £2.5 billion more than last year – in yet another example of tax receipts rising, as the tax burden sits at a post-war high.
Moreover, the debt is not ‘falling.’ The very opposite is true. Hunt may be on track to meet his rather relaxed fiscal rule of seeing the ratio of debt to GDP falling by the fifth rolling year of forecast.