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Reeves Beats Borrowing Forecasts Ahead of Crucial Budget
21 Aug
Summary
- Government borrowing much lower than expected in July 2025
- Debt interest costs jump over 25% in first 4 months of 2025
- Reeves likely to raise taxes or cut spending in autumn 2025 budget
As Chancellor Rachel Reeves prepares her autumn 2025 budget, new figures show government borrowing was much lower than expected last month. Data from the Office for Budget Responsibility reveals public borrowing totaled £1.1 billion in July 2025, the lowest for that month in three years and well below the £2.1 billion forecast.
This means government borrowing so far this year has matched the projections underpinning Reeves' tax and spending plans. However, the news is not all positive. Government spending on debt interest over the April-July 2025 period jumped by more than a quarter to £41.4 billion as gilt yields rose. With inflation remaining high, the government will also pay more to service its inflation-linked debt.
Analysts believe Reeves will still need to raise more than £20 billion through new cuts or taxes to keep on track with her fiscal rules and avoid unsettling investors. The Chancellor may face tough choices, as recent economic growth projections have been dialed back and the labor market has shown signs of weakness, partly blamed on an increase in employer national insurance contributions.
