On 21 August 2026 the Office for National Statistics (ONS) reported a provisional deficit in the public finances for the month of July 2026 of £1.8bn. This is £0.7bn more than in July 2025 and £2.3bn overbudget.

Henning Diederichs, ICAEW Director for the Public and Not-for-Profit Sectors, said: “The numbers confirm that the public finances remain weak, with public sector net debt in July in touching distance of £3.0tn. Net debt is 64% higher than the £1.8tn amount owed to external investors in March 2020, at the start of the pandemic.”

Public sector net borrowing in July of £1.8bn was £0.7bn higher than the £1.1bn incurred in the same month last year, with debt interest and higher spending continuing to outweigh tax receipts.

"This is despite the tax burden being at its highest level in relation to the size of the economy since the 1960s,” continued Diederichs. “This means it is challenging for the Chancellor to increase public spending significantly and stay within the government’s existing fiscal rules.”

He believes there is one crumb of comfort for the government in that the cumulative deficit for the first third of the financial year of £57bn was just £2bn overbudget, a slight improvement from June’s numbers.

"Keeping public spending under control will be key to maintaining the confidence of debt markets and hence minimising the risk of interest rates on government borrowing rising further,” he explained.

Month of July 2026

The monthly deficit of £1.8bn consisted of:

• a current budget surplus of £3.1bn, which was £0.1bn higher than in July 2025 but £0.9bn below budget; less
• net investment of £4.9bn, which was £0.8bn higher than a year previously and a £1.4bn overspend compared with budget.

Receipts of £113.5bn were £12.5bn higher than the £101.0bn monthly average for the previous 12 months (excluding January 2026, the main self-assessment month) reflecting July self-assessment tax receipts of £17.1bn. Meanwhile, current spending of £110.4bn was £2.4bn higher than the £108.0bn monthly average for the previous 12 months (including January 2026).

Net investment of £4.9bn was £0.9bn below the £5.8bn monthly average for the past 12 months (excluding March 2026 with its end-of-year capital rush).

Self-assessment tax receipts contributed to a net cash inflow during the month to reduce net debt from £2,995bn on 30 June to £2,985bn on 31 July 2026.

Year-to-date

The cumulative deficit for the first four months of the financial year of £57bn was £6bn lower than a year previously but £2bn overbudget, comprising:

• a current budget deficit of £38bn, £7bn lower than a year previously but £1bn overbudget; and
• net investment of £19bn, £1bn more than in the four months to July 2025 and £1bn more than budgeted.

As set out in Table 1, receipts were £409bn for the four months from April to July 2026 (up £24bn or 6% from the same period a year ago), while current spending (including depreciation) totalled £447bn (up £17bn or 4%). 

On the tax side of the equation, income tax and national insurance receipts both benefited from fiscal drag, while stronger corporate profits and anti-avoidance measures helped push up corporation tax receipts.

Meanwhile on spending, the rise in welfare costs reflected a 6.2% increase in the Universal Credit standard allowance and a 4.8% increase in the state pension from April 2026, while a fall in debt interest was driven by a £4bn swing in the uplift on inflation-linked debt (down from £18bn to £14bn) offsetting a £3bn increase in the balance of debt interest (from £25bn to £38bn).

Net investment in the first four months was up by £1bn to £19bn:

• a £3bn increase in gross capital formation (ie, capital expenditure) to £33bn; and
• a £1bn decrease in capital grants (including research and development and irrecoverable student loans) to £11bn; offset by
• a £1bn increase in depreciation to £25bn.

Borrowing and debt 

Table 2 summarises how the government borrowed a total of £67bn in the first four months of the financial year to take public sector net debt to a provisional £2,985bn on 31 July 2026. This comprised public sector net borrowing (PSNB) to fund the deficit of £57bn and other borrowing of £10bn to fund working capital and lending requirements.

The ratio of public sector net debt to GDP increased by 0.7 percentage points from 93.4% of GDP at the start of the financial year to a provisional 94.1% on 31 July 2026 after 1.5 percentage points of ‘inflating away’ caused by inflation and economic growth adding to GDP (the denominator in the debt to GDP ratio).

Public sector net debt on 31 July 2026 of £2,985bn comprised gross debt of £3,536bn less cash and other liquid financial assets of £551bn.

Public sector net financial liabilities (PSNFL or ‘persnuffle’) of £2,657bn was equal to net debt of £2,985bn plus £741bn in other financial liabilities less £1,069bn in illiquid financial assets. Meanwhile, negative public sector net worth of £751bn was equal to PSNFL less £1,906bn in non-financial assets.

Revisions

Caution is needed with respect to the numbers published by the ONS, which are repeatedly revised as estimates are refined, gaps in the underlying data are filled and errors are identified. This includes local government where the numbers are only updated quarterly in arrears and are based on budget or high-level estimates in the absence of monthly data collection.

In the July 2026 release the ONS revised the previously reported deficit in the first three months of the financial year down £2.7bn but increased the reported amount of public sector net debt as of 30 June 2026 up by £5bn to reflect updated data and error corrections.

The ONS also revised the deficit for the year ended 31 March 2026 up by £2bn to £130bn.

• For further information, read the public sector finances release for July 2026.