21 August 2025
If you are covering the latest UK Public Sector Finances, please find below a comment from Lindsay James, investment strategist at Quilter:
“Today’s public sector finances data highlights just why the rumour mill has kicked into overdrive about which taxes will rise or be implemented at the next Budget. The Office for National Statistics has put July’s borrowing figure at £1.1bn, which pleasingly is down from the year below, in what is a usually low month for public sector borrowing. However, borrowing in the financial year to July was £60bn, £6.7bn higher than last year and the third-highest April-July borrowing since monthly records began.
“But today’s figures are likely just a respite ahead of a crucial Autumn for the Chancellor and this government. Rachel Reeves has already committed to upping the level of borrowing to help fund a lot of her infrastructure plans. But this borrowing is also fuelling levels of spending which simply will not be sustainable over the longer-term. Financial markets, via bond yields, are indicating as much and it is getting to a point where the UK’s fiscal position needs to be re-examined. We know Reeves has a black hole to fill, the size of which varies and without economic growth it will need to be plugged by further borrowing or tax rises. The welfare debacle earlier this year highlighted that spending cuts are off the table for now.
“With debt interest already at massive levels, additional borrowing will be difficult, and unless the fiscal rules are changed, tax rises are inevitable. Reeves said the Budget of last year would not need to be repeated, but it has become clear that additional taxes are coming. The problem is that the constant testing of tax policies is self-defeating and risks dampening consumer and business confidence. Today’s figures show that the government is going to be forced to become more creative in its tax gathering methods if it doesn't want to break its manifesto promise of no tax rises on working people or breach the fiscal rules. While this situation goes on, economic growth will prove elusive, and this doom loop will become nigh on impossible to get out of.”
