The UK’s public sector net borrowing excluding public sector banks (PSNB ex) in the financial year to July 2023 was £56.6 billion, £13.7 billion more than in the same four-month period of 2022, according to the UK’s Office for National Statistics (ONS).
PSNB ex in July was £4.3 billion, £3.4 billion more than in July 2022 and the fifth-highest July borrowing since monthly records began in 1993.
In July, the interest payable on UK central government debt was £7.7 billion, £1.5 billion more than in July 2022 — and the highest interest payable in any July since monthly records began in April 1997.
The UK’s public sector net debt (PSND ex) was £2.578 trillion at the end of July 2023 and provisionally estimated at around 98.5% of the UK’s annual gross domestic product (GDP) — about 1.9 percentage points higher than in July 2022 and continuing at levels last seen in the early 1960s.
The ONS said the public sector year-to-date borrowing of £56.6 billion was £11.3 billion less than the £68 billion forecast by the Office for Budget Responsibility (OBR).
Susannah Streeter, head of money and markets, Hargreaves Lansdown: “There is a glimmer of good news for the UK government, with public sector borrowing coming in £1.7 billion below the forecast by the independent Office for Budget Responsibility for July.
“But although the government hasn’t had to borrow quite so much as expected, the debt burden is still very weighty compared to last year, which gives the government very little wiggle room to offer relief for taxpayers in the Autumn or the Spring.
“The monthly total came in at £4.3 billion, a whopping increase on the same month last year and the fifth biggest deficit in July since comparable records began back in 1993.
“The uplift in tax receipts is encouraging, especially for self-assessed income and the cost of interest payable on the government debt also undershot forecasts.
“But with higher interest rates beginning to bite, and employers becoming more cautious about hiring workers, the tax take may disappoint later this year.
“Yields for longer-dated government bonds have also risen over the last few months, as interest rate expectations have shot up due to the stubborn nature of inflation, which are also set to come back to bite in terms of higher debt interest spending.
“So, although there may be reason to be cheerful this month, a gloomier snapshot of on the public sector finances may be on the way.”
Victoria Scholar, Head of Investment, Interactive Investor: “According to the Office for National Statistics, UK public sector net borrowing (excluding public sector banks) hit £4.3 billion in July, less than analysts’ expectations for £5 billion and below the OBR’s forecast for £6 billion.
“However, it still came in £3.4 billion higher than in July last year and is the fifth highest July borrowing since monthly records began in 1993.
“Public sector debt excluding public sector banks was £2,578.9 billion at the end of July, or around 98.5% of UK annual GDP. Net debt as a percentage of GDP is at levels last seen in the early 1960s.
“The government recorded a lower-than-expected budget deficit and net borrowing, partly due to increased self-assessed income tax receipts which tend to be stronger around this time of year.
“This could potentially provide Chancellor Jeremy Hunt with some wiggle room to cut taxes ahead of the next general election in an attempt to win back some votes.
“After the government’s expensive energy crisis support on top of heavy spending during the pandemic, the Treasury has been trying to focus on fiscal prudence, limiting spending and refraining from tax cuts in order to prop up the public purse and balance the books.
“Plus, it is trying to steer clear of taking an expansional fiscal stance at a time of high inflation as this could work against what the Bank of England has been doing in terms of tightening monetary policy to curtail price pressures.”
Julian Jessop, economics fellow at free market think tank, the Institute of Economic Affairs: “Government borrowing continues to undershoot the official forecasts (by £11.3 billion so far this year), raising hopes that there may be more room for tax cuts than previously thought.
“But the outlook is unusually uncertain.
“Higher inflation will boost spending on the state pension and benefits, while higher interest rates will increase the cost of servicing debt. This will limit the room for permanent tax cuts, without matching cuts in other spending.
“But there will be some other offsets. The higher levels of wages, profits and prices will also boost tax revenues. And the most important component of ‘debt interest payable’ is the RPI uplift on the principal value of index-linked government bonds, which has now peaked.
“The bigger picture is that borrowing and debt are both still very high, and the Chancellor’s current fiscal rules leave him little wriggle room.
“Nonetheless, the best way to fix the public finances is to grow the economy, and tax cuts could still be part of the solution.”