Borrowing remains high when compared to the long-term pre-pandemic level
Government borrowing was down in July as the continued reopening of the economy improved tax revenues, according to the Office for National Statistics.
The budget deficit grew by £10.4bn in July, around half of the £20.5bn seen during the same month in 2020.
Borrowing remains high, at 10.8% of national income, when compared to the long-term average of 2.5% from before the crisis.
The recovery from the pandemic has seen tax receipts rise by £9.5bn in the year to July to £70bn.
Tax received from self-employed workers was particularly high last month as a result of the government’s tax deferral schemes.
Borrowing ended up at £78bn between April and July and continues to be under the Office for Budget Responsibility’s forecasts by about 25%. Economists said that total borrowing for the year would be at £175.3bn, down from £298bn last year.
Rishi Sunak, the chancellor, said: “Our recovery from the pandemic is well under way, boosted by the huge amount of support government has provided. But the last 18 months have had a huge impact on our economy and public finances and many risks remain. We are committed to keeping the public finances on a sustainable footing.”
“The numbers are going the right way; looking at money coming in since the start of the financial year almost every box is in the black. Corporation tax take is up 15%, Fuel duty nearly 50% and tax from self-assessment up a whopping 148%,” said Danni Hewson, AJ Bell financial analyst.
“The economic engine is purring, but keeping it ticking over during lockdowns and restrictions has taken its toll and the road ahead is unlikely to be pothole free. Any chancellor will have to become adept at tightrope walking for years to come. Lean too far, spend too little and there is a real danger that parts of the economy that have been pummelled the most will struggle. Tip the other way and the country might not get back in shape quickly enough to deal with the next big shock.”
