Kristina Roberts
Economists have warned that Britain’s public finances remain in a “chronically weak” state as Chancellor Rachel Reeves prepares for potential tax rises later this year.
Since April, public sector borrowing has reached £60bn—£6.7bn higher than at the same point last year—according to the Office for National Statistics (ONS). While July’s borrowing stood at just £1.1bn, the lowest for the month in three years thanks to stronger self-assessed income tax receipts, experts say the apparent improvement masks deeper problems.
Capital Economics argued the July figures are “not as good as they look,” with UK economist Alex Kerr cautioning that the outlook remains bleak ahead of the autumn Budget.
Pantheon Macroeconomics’ Elliott Jordan-Doak echoed that warning, suggesting Reeves will still be forced to introduce tax rises in October. “The big picture remains that the public finances are in chronically weak condition,” he said. “With rising gilt yields, a likely productivity downgrade, and ongoing policy U-turns, the Chancellor may need to rely on ‘sin’ and ‘stealth’ tax hikes, duty increases, and a pensions tax raid to stick to her fiscal rules—while still claiming to keep headline tax rates unchanged.”
PwC UK’s Nabil Taleb added that Reeves faces the difficult balancing act of sustaining growth while adhering to strict fiscal limits. “Higher debt servicing costs as a share of revenues will leave the public finances more exposed to future shocks,” he warned.
Debt interest payments hit £7.1bn in July—£200m more than a year earlier—intensifying pressure on the Treasury as Reeves prepares her Budget strategy.
