Further deterioration in the public finances underlines fiscal challenges for the Autumn Budget 21 August 2024 Higher-than-expected spending and somewhat weaker receipts have left government borrowing £4.7 billion higher than expected by the OBR, just four months into the 2024-25 financial year, underlining the difficult choices facing the Government at the Autumn Budget, the Resolution Foundation said today (Wednesday). The latest ONS data showed that borrowing was £3.1 billion in July – £1.8 billion higher than last year and the highest July borrowing since a pandemic-affected 2021 – and £3 billion higher than the OBR expected in July alone. For the year to date, borrowing is now £4.7 billion higher than the OBR’s most recent forecast in March. Higher borrowing is driven by central government spending which is running £9.2 billion higher than forecast for the year to date, reflecting higher day-to-day government outlays including on public-sector pay. This deterioration in spending is not unexpected after the Chancellor unveiled a £21.9 billion in-year borrowing gap last month. And, despite faster-than-expected growth and higher inflation, tax receipts remain £0.8 billion below the OBR forecast, partly due to lower than expected self-assessment receipts in July. Cara Pacitti, Senior Economist at the Resolution Foundation, said: “With borrowing £3 billion higher-than-expected in July, the deteriorating state of the public finances illustrate the challenges that Rachel Reeves will face ahead of her first Budget this Autumn. “The fiscal inheritance facing the Chancellor is one of rising taxes, increasing spending challenges, and very little wriggle room in the event of bad economic news. This combines to create a challenging backdrop for the new Government to realise its ambitions of boosting growth while putting the public finances on a sustainable path.”
