Surprise good news as government borrowing less than forecast

Published

2 months ago

August 21, 2025

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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.

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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.

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.

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.”

Politics

UK played ‘vital role’ in Gaza peace deal, says Trump aide, after minister branded ‘delusional’

Published

2 hours ago

October 13, 2025

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UK played 'vital role' in Gaza peace deal, says Trump aide, after minister branded 'delusional'

Steve Witkoff, the US special envoy to the Middle East, has claimed the UK played a “vital role” in helping negotiate the Gaza peace deal, smoothing over a potential diplomatic row between London and Washington.

Witkoff took to X on Monday, ahead of meeting President Donald Trump in Israel, to praise the UK.

“I would like to acknowledge the vital role of the United Kingdom in assisting and coordinating efforts that have led us to this historic day in Israel,” Witkoff wrote.

“In particular, I want to recognise the incredible input and tireless efforts of National Security Advisor Jonathan Powell.”

His comments came 24 hours after education secretary Bridget Phillipson was branded “delusional” by Mike Huckabee, the US ambassador to Israel, for claiming that Sir Keir Starmer’s presence at a signing ceremony for today’s ceasefire deal in Egypt “demonstrates the key role that we [Britain] have played”.

The minister made her remarks on Sunday Morning With Trevor Phillips but did not say exactly what the UK’s role in the ceasefire, largely attributed to Donald Trump, is or was.

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Phillipson added: “We have played a key role behind the scenes in shaping this.

“It’s right that we do so because it’s in all of our interest, including our own national interest, that we move to a lasting peace in the region.

“These are complex matters of diplomacy that we are involved in. But we do welcome and recognise the critical role that the American government played in moving us to this point.”

Her comments prompted Mr Huckabee to repost the Sky News clip on social media, claiming: “I assure you she’s delusional.”

He added: “She can thank Donald Trump anytime just to set the record straight.”

Mr Huckabee was part of the negotiating team for the peace deal, with Mr Trump calling the former Arkansas governor “AMAZING” as he said he “worked so hard, and did so much, to bring about peace in the Middle East”.

In August, Mr Huckabee said the UK and other European nations that said they would declare a Palestinian state were “having the counterproductive effect that they probably think that they want”.

Israel: UK did not play key role in peace deal

Israel’s deputy foreign affairs minister, Sharren Haskell backed Huckabee, telling Sky News the UK played “the opposite” of a key role in the peace deal after recognising the Palestinian state.

“The message that the UK government has sent Hamas was the message that: the longer they continue this war, they will be rewarded.

“I mean, you must understand that when a terrorist organisation is thanking you. You are on the wrong side of history.”

It is understood the prime minister has underlined Mr Trump’s key role in securing this deal throughout the process. Publicly, he praised Mr Trump twice in his press conference in India on Thursday.

Ms Phillipson stood by the September decision to declare a Palestinian state, saying it was “the right thing to do”.

Husam Zomlot, the Palestinian ambassador to the UK, told Sky News it was a “moment of leadership” for the UK to declare a Palestinian state, and a “responsibility to begin to correct a century of the gravest historic injustices committed against our people”.

He added: “That moment three weeks ago, when the UK did recognise, is a moment when we can say that the wheels of history are turning in a different direction.”

No plans for British troops on the ground

The education secretary also told Sky News the government has “no plans” to put British troops into Israel or Gaza as part of a stabilisation force after the ceasefire.

The US military will help establish a multinational force in Israel, known as a civil-military coordination centre, which is likely to include troops from Egypt, Qatar, Turkey and the UAE.

On Friday, US officials said up to 200 US troops already based in the Middle East will be moved to Israel to help monitor the ceasefire in Gaza.

The day before, President Trump announced Israel and Hamas had “signed off on the first phase” of a peace plan he unveiled last week.

Aid trucks have been gathering in Egypt to cross into Gaza after months of warnings by aid groups of famine in parts of the territory.

In Israel, the remaining hostages are due to be returned from Gaza by Hamas on Monday under the first phase of the peace plan. Twenty are believed to still be alive, 26 have been declared dead, while the fate of two is unknown.

The ceasefire agreement has been made two years after Hamas stormed Israel on 7 October 2023, killing 1,200 people and taking 251 hostages.

Israel’s military offensive has killed more than 67,000 Palestinians in Gaza, according to the Hamas-run health ministry, which the UN deems reliable.