The UK public finances improved in July from a particularly weak reading in June, but the government still borrowed more than its fiscal watchdog had expected over the month.
Public sector net borrowing came to £4.9bn last month, an improvement of £800mn compared with July 2021 and far better than the £20.9bn deficit in June.
But the decline between June and July was expected because the government did not have big debt interest bills to pay last month, and the level of borrowing was still £200mn higher than forecast by the Office for Budget Responsibility.
Ministers will be pleased that tax receipts held up well, with the government collecting £78.2bn in revenues in July, which was £6.1bn more than a year earlier.
Borrowing is still expected to rise over the 2022-23 year as a whole, however, because high inflation has raised the cost of index-linked government debt significantly.
Chancellor Nadhim Zahawi said that high inflation was “putting pressure on the public finances by pushing up the amount we spend on debt interest”.
The Treasury cautioned not to take too much comfort from the stronger figures in July compared with June, because at a time of elevated inflation there would be significant volatility in the monthly data.
