UK borrows more than expected in July as Healey prepares for first Budget

The government borrowed slightly more than expected in July, according to figures published as Chancellor John Healey draws up his first Budget.

The Office for National Statistics (ONS) said borrowing was £2.3bn more than official forecasts from the Office for Budget Responsibility (OBR).

Borrowing, the gap between what the government spends and what it takes in tax receipts, was £1.8bn in July, two thirds higher than the same month last year.

Economists warned the figure will restrict Healey and Prime Minister Andy Burnham's room for manoeuvre as they target measures aimed at easing the cost of living for households, with little room to increase borrowing in the Budget on 27 October.

Healey has made it clear he will oversee "strong fiscal discipline" at the Budget – which will limit how much the government has to spend.

He has adopted his predecessor Rachel Reeves' fiscal rules, which commit the government to funding all day-to-day spending through tax receipts by the end of the decade.

Responding to the borrowing figures, Healey said: "We are cutting the deficit faster than any other G7 economy, while giving people a bit of breathing space with cost of living pressures and focusing support to get young people into work."

The government borrowed £16bn less in July than it did in June , helped by a surge in self-assessed income tax receipts.