Overall public sector net borrowing (PSNB) narrowed sharply in July. At £3.48 billion, the shortfall was down from June's smaller revised £17.11 billion but still larger than both the market consensus and £0.1 billion more than posted a year ago. Excluding public sector banks (PSNB-X), the deficit stood at £4.30 billion versus £17.93 billion in June and just £0.9 billion in July 2022. This was the fifth-highest July borrowing since monthly records began in 1993. As usual in July, the monthly drop in borrowing reflected strong seasonal inflows of self-assessed tax income.

At £56.6 billion, the PSNB-X over the financial year to date was £13.7 billion larger than over the same period in FY2022/23 but still £11.3 billion less than the £68.0 billion forecast by the Office for Budget Responsibility (OBR). However, public sector net debt (PSND-X) was £2,578.9 billion or around 98.5 percent of UK GDP. This was 1.9 percentage points higher than in July 2022 and sustains levels last seen in the early 1960s.

Consequently, while leaving room for some pre-election tax giveaways, the trend in public sector borrowing shows there is much work still to do if the government wants to get its finances back in order. To this end, the UK ECDI now stands at 17 the ECDI-P at 13, both measures showing economic activity in general modestly outperforming expectations which may be seen as slightly positive for tax inflows.

Overall net borrowing (PSNB) is seen falling sharply to 3.0 billion, in line with the usual July seasonal pattern.

The public sector net borrowing requirement (PSNB) is the difference between the sector's receipts and expenditure and so provides a simple measure of government fiscal policy. In response to the global economic crisis in 2008/09 the UK government introduced a number of measures designed to show the underlying state of public sector finances by omitting temporary distortions caused by financial interventions. It bases its fiscal policy on these measures. To this end, the underlying gauge of government borrowing watched most closely by financial markets is the PSNB-X which takes overall net borrowing (PSNB) but excludes public sector banks.

Changes in public sector finances can be used to determine the thrust of the government's fiscal policy. Generally speaking when the government has a rising deficit (or falling surplus) it is loosening its fiscal stance with a view to boosting economic activity. When its deficit is falling (or surplus rising), fiscal policy is being tightened in order to slow economic growth. However, sometimes changes in government financial positions can be due to factors outside of the government's control and do not signal an explicit shift in policy. This means that great care is needed in interpreting the data.