Borrowing higher since pandemic which could lead to tax rises in the Autumn Budget – London Business News | Londonlovesbusiness.com

According to the Office for National Statistics (ONS) government borrowing increased to the highest amount in July since the Covid pandemic.

This has now fuelled speculation the Chancellor Rachel Reeves could raise taxes in the Autumn Budget.

Borrowing hit £31. Billion in July which is the highest level since 2021 and the ONS said its £1.8 billion more compared to the same period last year.

The Office for Budget Responsibility (OBR) had predicted that borrowing would have been £4.7 billion less at £46.6 billion, but instead the figure hit £51.3 billion.

The rise in borrowing has been attributed to the increase in social benefits which was raised amid inflation and higher wage increases.

Jessica Barnaby, the ONS deputy director for public sector finances, said, “July borrowing was almost £2bn higher this year than in 2023. Revenue was up on last year, with income tax receipts in particular growing strongly.

“However, this was more than offset by a rise in central government spending where, despite a reduction in debt interest, the cost of public services and benefits continued to increase.”

“Today’s figures are yet more proof of the dire inheritance left to us by the previous government,” chief secretary to the Treasury Darren Jones said.

“A £22bn black hole in the public finances this year, a decade of economic stagnation, and public debt at its highest level since the 1960s, with taxpayers’ money being wasted on debt interest payments rather than on our public services.

“We are taking the tough decisions that are needed to fix the foundations of our economy, modernise our public services and rebuild Britain so we can put more money back into people’s pockets across the country.”

Rob Wood, chief UK economist at Pantheon Macroeconomics warned that public spending is “already overshooting budget forecasts.”

Wood added, “Further revisions could easily change the picture, but chancellor Rachel Reeves will likely have to raise taxes and borrow more in the medium term to cover spending more on public services.”