The government borrowed the least amount of money in three years last month, official figures showed, in a surprise bout of good news for the 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.
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 to July 2024, the state still spent more on the cost of that lending.
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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, called bonds, rose.
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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