The public finances have produced a surprising start to the fiscal year, with government borrowing falling to £16 billion in June, undershooting official forecasts for the first time since April.
According to figures from the Office for National Statistics, borrowing was down sharply from £23.3 billion in May and £4.7 billion lower than the £20.7 billion recorded in June last year.
The Treasury has marked the moment by scrapping VAT on household energy bills, a cut expected to take about £45 off a typical annual household bill at an estimated cost of £850 million, funded by scrapping the digital ID programme.
Two forces drove the improvement in government borrowing: tax receipts climbed to £91.6 billion, up from £85.4 billion in June 2025, with income tax, VAT, national insurance, and corporation tax all contributing more.
The second factor was the debt interest bill, which fell to £11.3 billion from £16.6 billion a year earlier, helped by lower than forecast spending on inflation-linked bonds.
However, the fuller picture is less kind, with the government having borrowed £57.6 billion, £2.7 billion above the forecast for the period, after significant overshoots in April and May.
The new administration has committed to the previous government's fiscal rules, which require day-to-day spending to be funded from tax revenues and the debt burden to fall by the end of the parliament.
For SMEs, this promise cuts both ways, steadying the gilt market that feeds their borrowing costs but keeping the possibility of revenue-raising measures firmly on the table for the autumn Budget.
Consumer-facing firms will welcome the addition to household spending power, but business premises remain untouched by the VAT cut.
The reading for Britain's business owners is cautiously positive, with cheaper debt servicing, forecasts beaten, and a government funding its first giveaway by cancelling a programme rather than raising a tax.
However, the question remains whether this discipline will survive contact with the autumn Budget.
