{"id":744977,"date":"2026-08-21T09:40:11","date_gmt":"2026-08-21T09:40:11","guid":{"rendered":"https:\/\/www.newsbeep.com\/uk\/744977\/"},"modified":"2026-08-21T09:40:11","modified_gmt":"2026-08-21T09:40:11","slug":"uk-reports-unexpected-deficit-of-1-8bn-as-john-healey-prepares-for-first-budget-tax-and-spending","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/uk\/744977\/","title":{"rendered":"UK reports unexpected deficit of \u00a31.8bn as John Healey prepares for first budget | Tax and spending"},"content":{"rendered":"

The UK government ran a larger than expected \u00a31.8bn deficit in July, underlining the challenges facing the chancellor, John Healey<\/a>, as he draws up his first budget.<\/p>\n

City economists had expected a shortfall of zero for July, a month when Treasury receipts tend to be swollen by self-assessment income tax payments.<\/p>\n

At \u00a317.1bn, the self-assessment tax paid in July was \u00a31.7bn higher than the same month last year. However, the Office for National Statistics<\/a> said the government still ran a \u00a31.8bn deficit, as \u201cspending growth outpaced receipts\u201d.<\/p>\n

In the first four months of this financial year the cumulative deficit was \u00a356.7bn \u2013 lower than last year but still running \u00a32.3bn ahead of the Office for Budget Responsibility<\/a> forecast.<\/p>\n

Healey will announce his budget on 28 October. The public finances are expected to be gloomier than forecast at Rachel Reeves\u2019s spring statement in March, when the Iran war had only just begun.<\/p>\n

At that time, Reeves had a generous \u00a323.6bn buffer<\/a>, or headroom, against her fiscal rules, but analysts believe a significant proportion of that may be eaten away by higher inflation, slower growth and rising bond yields.<\/p>\n

Moves in global bond markets in recent days have pushed up the yield \u2013 in effect the interest rate \u2013 on government bonds, creating a fresh headache for the chancellor.<\/p>\n

Martin Beck, the chief economist at the consultancy WPI Strategy, said: \u201cTen-year gilt yields are above 5%, reflecting energy-related inflation concerns, and these will gradually feed through into a larger debt-interest bill as existing debt is refinanced. At the same time, the government faces pressure to loosen inherited spending plans, meet unfunded defence commitments and deliver on its own ambitions for housing, infrastructure and public services.\u201d<\/p>\n

The UK\u2019s large debt pile means small moves in interest rates can be costly over time.<\/p>\n

The ONS said total public debt was \u00a32.98tn in July, or 94% of GDP \u2013 up \u00a396bn on a year earlier \u2013 in line with Labour\u2019s plan to borrow for investment in infrastructure projects.<\/p>\n

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In response to July\u2019s public finances, Healey said: \u201cFiscal discipline is the bedrock of our UK economic stability and national security, which is why we are committed to meeting our fiscal rules, with a buffer against global uncertainties.<\/p>\n

\u201cWe are cutting the deficit faster than any other G7 economy, while giving people a bit of breathing space with cost of living pressures and focusing support to get young people into work.\u201d<\/p>\n

Healey will have to find an additional \u00a31.2bn a year to fund the defence investment plan, which prompted him to resign as the defence secretary in June,<\/a> claiming it was not generous enough.<\/p>\n","protected":false},"excerpt":{"rendered":"The UK government ran a larger than expected \u00a31.8bn deficit in July, underlining the challenges facing the chancellor,…\n","protected":false},"author":2,"featured_media":744978,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[5],"tags":[84,59,56,54,55],"class_list":["post-744977","post","type-post","status-publish","format-standard","has-post-thumbnail","category-business","tag-business","tag-gb","tag-uk","tag-united-kingdom","tag-unitedkingdom"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/posts\/744977","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/comments?post=744977"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/posts\/744977\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/media\/744978"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/media?parent=744977"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/categories?post=744977"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/tags?post=744977"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}