The government borrowed the least amount of money in three years last month, official figures showed, in a surprise bout of good news for Chancellor Rachel Reeves.
Not since July 2021, in the midst of the COVID-19 pandemic, was state borrowing so low, according to data from the Office for National Statistics (ONS).
Increases in tax and national insurance receipts meant public sector net borrowing was £1.1bn in July, meaning there was a £1.1bn gap between government spending and income.
That borrowing is less than half the figure (£2.6bn) expected by economists polled by the Reuters news agency, as self-assessed income tax was £600m higher than expected.
But borrowing was still £6bn higher in the first four months of the financial year, which started in April, than the same period in 2024.
Despite a £2.3bn drop in monthly borrowing when July 2025 is compared with July 2024, the state still spent more on the cost of that lending.
The amount of interest paid on government debt was £7.1bn, £200m more than a year earlier.
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The cost of government borrowing has increased in recent months as the interest rate investors demand on loans issued to the UK (bonds) rose.
At the start of the week, the government’s long-term borrowing cost, as measured by the interest rate on 30-year bonds (known as the gilt yield), closed at the highest level since 1998.
What does it mean for the chancellor?
The monthly borrowing data is in line with the predictions made by independent forecasters, the Office for Budget Responsibility (OBR).
It may not be as rosy a picture, however, as research firm Capital Economics point out the cumulative budget deficit, rather than a monthly figure, is £5.7bn above the OBR’s forecast.
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Are taxes going to rise?
This matters for the chancellor’s self-imposed fiscal rules, to bring down government debt and balance the budget by 2030, the firm said.
“The chancellor will probably need to raise taxes by £17bn to £27bn at the budget later this year,” Capital Economics’ UK economist Alex Kerr said.
Elevated self-assessment income tax receipts “may just reflect the timing of tax returns being recorded, and receipts in August may be weaker than expected”, he added.
Responding to the figures, Ms Reeves’s deputy, chief secretary to the Treasury, Darren Jones, said: “Far too much taxpayer money is spent on interest payments for the longstanding national debt.
“That’s why we’re driving down government borrowing over the course of the parliament – so working people don’t have to foot the bill and we can invest in better schools, hospitals, and services for working families.”
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Legislators in Texas have approved new congressional maps designed to boost Donald Trump’s Republicans at next year’s midterm elections.
Known as redistricting, the state’s re-drawn map would shift conservative voters into districts currently held by Democrats, and combine other districts with a Democratic majority into one.
The process is not new, and is completely legal – unless it is ruled to be racially motivated – but typically occurs every 10 years after the US Census to account for population changes.
The push to redistrict early came from Mr Trump himself, who wants to bolster his chances of preserving the slim Republican majority in the House of Representatives at next year’s crucial midterms.
But by trying to re-draw the maps in the red state of Texas, Democrats have lined up their own counter redistricting effort in the blue state of California.
If more states decide to re-consider their maps, it has the potential to largely determine the outcome of the 2026 midterms, before a single vote is cast.
What’s happening in Texas?
Mr Trump first said he wanted politicians in Texas to redraw the state’s congressional district in July. The governor of Texas, Greg Abbott, followed up on the president’s demands, calling for a special session to vote on new maps.
“Please pass this map ASAP,” Mr Trump urged on his Truth Social platform on Monday. “Thank you, Texas!”
Republican Texas State Representative Todd Hunter brought about the legislation. Pic: AP
In an effort to try to make passing the vote as difficult as possible, Democrats fled the state for two weeks. Per parliamentary rules, if enough Democrats refuse to take part in the special session, the Texas House can’t meet.
On their return, each Democratic politician was assigned a police escort to ensure they attended the session.
Nicole Collier, who refused the police escort, stayed in the House for two nights, and was pictured with an eye mask and blanket trying to sleep at her desk.
Nicole Collier sleeps in the House chamber after refusing a police escort. Pic: Reuters
Once the debate started, the doors to the chamber were locked and all members wanting to leave had to get a permission slip to do so.
After nearly eight hours, the legislation to formally change the map was passed 88-52 on Wednesday.
It now needs to be approved by the Texas Senate, where Republicans hold a majority, and then signed off by Mr Abbott, who has already committed to doing just that.
Activists protest against mid-decade redistricting in Texas. Pic: AP
Why re-draw maps?
Republicans in Texas have openly said the rally to re-draw congressional maps is in the party’s interest.
Todd Hunter, the Republican who wrote the legislation formally creating the new map, told the House: “The underlying goal of this plan is straight forward: improve Republican political performance.”
He said the dispute is nothing more than a partisan fight, and made reference to the US Supreme Court having previously allowed politicians to redraw districts for partisan purposes.
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Pic: AP
Democrats hit back, arguing the disagreement was about more than partisanship.
“In a democracy, people choose their representatives,” representative Chris Turner said. “This bill flips that on its head and lets politicians in Washington, DC, choose their voters.”
Another Democrat, John H Bucy, blamed the president, saying: “This is Donald Trump’s map.
“It clearly and deliberately manufactures five more Republican seats in Congress because Trump himself knows that the voters are rejecting his agenda.”
How have Democrats responded?
The move by Republicans has triggered a tit-for-tat move by the Democrats, who are due to meet in California on Thursday to revise the state’s maps in order to gain five more seats.
To enact the same powers in California will prove harder, as state laws require an independent commission to take responsibility for redistricting – meaning it would need to be approved by voters in a special election.
In other blue states, rules are even tighter. For example, in New York, they cannot draw new maps until 2028, and even then, only with voter approval.
Despite the obstacles, California governor Gavin Newsom confirmed a redistricting election will take place in the state on 4 November, in order to “fight fire with fire”.
His plan has gained support from former president Barack Obama, who said it was necessary to “stave off” the Republicans’ move in Texas.
Barack Obama attends Trump’s inauguration in January. Pic: The New York Times via AP
Could this affect the midterms?
The midterms in November next year will likely be on a knife edge.
Whatever the outcome, it could shape the remainder of Mr Trump’s second term in office. A Democrat majority would make it tougher for him to pass laws.
Currently, Republicans control the House of Representatives in Washington, 219-212 (excluding four open vacancies). A party needs 218 seats for a majority.
In the Senate, the Republicans hold a similarly slim majority of 53 to 45.
Gavin Newsom is framing his response as the ‘election rigging response act’. Pic: Reuters
However, the incumbent president’s party typically loses seats in the midterms.
In the 2018 midterms, during Mr Trump’s first tenure as president, the Democrats took control of the House. Likewise, in 2022, when Joe Biden was president, the House swung back to the Republicans.
It’s important to note that 27 House seats will remain in states that are unlikely to redraw their maps, according to The New York Times.
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In a bid to avoid a repeat of history, Mr Trump is pushing for redistricting in states beyond Texas. Top Republicans in states like Indiana, Missouri, and Florida continue to talk about tweaking their maps to create more Republican-controlled congressional seats.
While Ohio has to legally redraw, the timing of which could benefit the Republicans, and, by extension, Mr Trump.
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