The UK posted an unexpected £1.8bn budget deficit in July, £2.3bn above the OBR forecast, while government debt neared £3tn at £2,985bn (94% of GDP). Chancellor John Healey emphasized fiscal discipline amid rising borrowing costs.

The deficit rose as spending outpaced tax receipts despite strong self-assessment revenue. Net social benefits spending increased £2bn and goods/services spending rose £1.2bn. Retail sales fell 0.5% in July, the first decline in three months.

Economists warn fiscal headroom has shrunk to £17bn from £24bn in March, pressuring Prime Minister Andy Burnham ahead of the October 28 Budget. Sir Mel Stride countered with Conservative plans for £50bn spending cuts.

Consumer confidence unexpectedly rose to a two-year high of -14 in August, while sterling held steady at $1.365. Healey insisted the UK cuts deficits faster than G7 peers while supporting cost-of-living pressures.