Budget strain prompts tax questions

New borrowing figures complicate Labour's tax strategy as Britain heads toward the autumn budget.

Britain faces tax rise pressure as borrowing climbs

Public borrowing has risen to about £60 billion since April, with July receipts boosted by a record monthly tax take of roughly £100 billion. The figures include a £2.6 billion contribution from Labour’s increase to employers’ National Insurance Contributions, and they come as critics warn the budget outlook remains fragile.

Analysts say the data test Labour’s fiscal rules and raise the prospect of further tax moves in October. Economists at Pantheon Macroeconomics warned that a gap could open up unless taxes rise or spending is restrained, while capital market observers warn gilt yields could stay elevated as doubts over growth persist.

The figures lay bare a key political clash: keep promises of tax stability while trying to repair a financing gap that critics say is widening. The debate highlights how spending choices and tax policy have become weapons in the autumn budget fight. Economists see a possible mix of stealth taxes and targeted levies, even as Labour defends its fiscal rules in public. The risk is a political cycle that could trap both sides in unfunded commitments and slow growth at a delicate moment for households.

Highlights

The budget will test promises against a fragile balance sheet.