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UK posts larger-than-expected July deficit as gilt yields rise
July ended with a £1.8bn deficit even though self-assessment tax receipts rose to £17.1bn, while public debt totaled £2.98tn, or 94% of GDP.
The UK government reported a larger-than-expected deficit of £1.8bn in July, with City economists having expected a zero shortfall for the month, when receipts are typically boosted by self-assessment income tax payments, according to the Guardian Business and Guardian Economics.
The Office for National Statistics said spending growth outpaced receipts, even as self-assessment tax paid in July reached £17.1bn, £1.7bn higher than a year earlier. Looking at the fiscal year to date, the cumulative deficit in the first four months was £56.7bn, still £2.3bn above the Office for Budget Responsibility forecast.
The report also highlighted the pressure on Chancellor John Healey as he prepares his first budget on 28 October, noting that expected conditions may be gloomier than those in Rachel Reeves’s March spring statement. It said the spring statement included a £23.6bn headroom buffer against fiscal rules.
Global bond market moves in recent days have pushed up gilt yields, which can increase the debt-interest bill as existing debt is refinanced. Martin Beck of WPI Strategy said 10-year gilt yields are above 5%, reflecting energy related inflation concerns, and that these changes could feed through gradually into higher borrowing costs over time.