#obr – Martin Wheatcroft

Public finances continue to disappoint ahead of the Budget

The cumulative budget overrun has widened from £7bn to £10bn in seven months, reveals latest data from the Office for National Statistics.

The monthly public sector finances release, published by the Office for National Statistics (ONS) on 21 November 2025, reported a provisional shortfall between receipts and public spending of £17bn in October and a cumulative deficit of £117bn for the seven months then ended.

Martin Wheatcroft, external adviser on public finances to ICAEW, says: “The monthly public finances continue to disappoint, with the cumulative budget overrun widening from £7bn in the last release to £10bn for the seven months to October.

“While only slightly worse than expected, there were no rays of sunshine in these numbers for a beleaguered Chancellor trying to navigate her way through a series of political, economic and fiscal minefields surrounding the Autumn Budget.”

Month of October 2025

There was a £17bn shortfall between provisional receipts of £96bn and total public spending of £113bn in October 2025. This was £2bn better than the £19bn deficit incurred in October last year (£89bn receipts less £108bn total spending), but £3bn more than the budget of £14bn for the month.

Current spending of £108bn and net investment of £5bn in October were both in line with the £108bn and £5bn monthly averages incurred respectively during the first six months of the financial year.

October’s semi-annual advance tax payments meant that public sector net debt fell by £12bn during the month (from £2,917bn on 30 September to £2,905bn on 31 October 2025), with a net inflow of £29bn from working capital movements and lending activities more than offsetting the £17bn absorbed by the deficit.

Seven months to October 2025

The provisional £117bn deficit for the seven months to October 2025 was £9bn or 8% more than in the same seven months last year, and £10bn more than the £107bn that was budgeted. The £10bn overrun can be analysed as a £15bn adverse variance on the current budget deficit, offset by a £5bn underspend on net investment.

Table 1 highlights how year-to-date receipts of £672bn were 7% higher than the same period last year, with income tax up 8% from a combination of inflation and fiscal drag from frozen tax allowances. National insurance was up 19% as a result of the increase in employer national insurance from April 2025 onwards, and VAT receipts were up 4%, broadly in line with consumer price inflation.

Compared to last year, the 8% increase in spending to £756bn in the first seven months to October 2025 has principally been driven by public sector pay rises, higher supplier costs, the uprating of welfare benefits and higher debt interest.

Debt interest of £88bn was £9bn higher than for the first seven months of 2024/25, comprising a £7bn increase in indexation on inflation-linked debt as inflation rose again in 2025 and a £2bn increase in interest on variable and fixed-interest debt. The latter reflects a higher level of debt compared with a year ago, offset by a lower Bank of England base rate.

Net investment of £33bn in the first seven months of 2025/26 was £2bn or 6% higher than the same period last year. This comprised capital expenditure of £55bn (up by £2bn or 4%) and capital transfers (capital grants, research and development funding and student loan write-offs) of £20bn (up £2bn or 11%), less depreciation of £42bn (up by £2bn or 5%).

Table 1: Summary receipts and spending

7 months to Oct	2025/26 £bn	2024/25 £bn	Change
Income tax	167	154	+8%
VAT	122	117	+4%
National insurance	114	96	+19%
Corporation tax	60	56	+7%
Other taxes	135	130	+4%
Other receipts	74	73	+1%
Current receipts	672	626	+7%

Public services	(424)	(393)	+8%
Welfare	(181)	(171)	+6%
Subsidies	(21)	(20)	+5%
Debt interest	(88)	(79)	+11%
Depreciation	(42)	(40)	+5%
Current spending	(756)	(703)	+8%

Current deficit	(84)	(77)	+9%

Net investment	(33)	(31)	+6%

Deficit	(117)	(108)	+8%

Budget for the rest of the financial year

The deficit is budgeted to be £118bn for the full year ending 31 March 2026, comprising £107bn in the first seven months of the year to October 2025 and £11bn in the remaining five months.

The latter comprises budgeted deficits of £9bn and £11bn in November and December 2025, a forecast surplus of £23bn in January, and deficits of £1bn and £13bn in February and March 2026.

Borrowing and debt

Table 2 summarises how the government borrowed £95bn in the first seven months of the financial year to take public sector net debt to a provisional £2,905bn on 31 October 2025. This comprised £117bn in public sector net borrowing (PSNB) to fund the deficit, less a £22bn net inflow from working capital movements and government lending.

The table also illustrates how the debt to GDP ratio increased by 1.0 percentage points from 93.5% of GDP at the start of the financial year to 94.5% on 31 October 2025. Incremental borrowing of £95bn, equivalent to 3.2% of GDP, was partly offset by 2.2 percentage points from the ‘inflating away’ effect of inflation and economic growth on GDP, the denominator in the net debt to GDP ratio.

Table 2: Public sector net debt and net debt/GDP

7 months to Oct	2025/26 £bn	2024/25 £bn
PSNB	117	108
Other borrowing	(22)	10
Net change	95	98
Opening net debt	2,810	2,686
Closing net debt	2,905	2,784

*PSNB/GDP*	*4.0%*	*3.8%*
Other/GDP	(0.8%)	(0.4%)
Inflating away	(2.2%)	(3.1%)
*Net change*	*1.0%*	*0.3%*
Opening net debt/GDP	93.5%	94.4%
*Closing net debt/GDP*	94.5%	94.7%

Public sector net debt on 31 October 2025 of £2,905bn comprised gross debt of £3,352bn, less cash and other liquid financial assets of £447bn.

Public sector net financial liabilities were £2,583bn, which included public sector net debt plus other financial liabilities of £715bn, less illiquid financial assets of £1,037bn. Public sector negative net worth was £926bn, comprising net financial liabilities less non-financial assets of £1,657bn.

Revisions

Caution is needed with respect to the numbers published by the ONS, which are repeatedly revised as estimates are refined and gaps in the underlying data are filled. This includes local government, where the numbers are only updated in arrears and are based on budget or high-level estimates in the absence of monthly data collection.

This month was no different, with the ONS revising previously reported numbers for six months to September 2025 and for previous financial years. However, on this occasion, the changes made did not affect the aggregate totals when rounded to the nearest billion pounds.

Regular updates to economic statistics resulted in an upward revision to nominal GDP and a consequential 0.2 percentage point reduction in the ratio of public sector net debt to GDP from 95.3% to 95.1% as of 30 September 2025.

For further information, read the public sector finances release for October 2025.

This article was written by Martin Wheatcroft on behalf of ICAEW and was originally published by ICAEW.

ICAEW chart of the week: A big Autumn Budget hole to fill?

My chart for ICAEW this week takes a look at the £40bn ‘hole’ in the public finances that the Chancellor may have to fill when she presents the Autumn Budget 2025 to Parliament on Wednesday 26 November.

There are two really big questions that most of us have for the Chancellor about the Autumn Budget 2025. Firstly, just how much money does she need to find? Secondly, where is she is going to find it?

My chart for ICAEW this week focuses on the first question – how much will the Chancellor need to find (in tax rises or spending cuts) to stick within her fiscal rules?

Speculation ranges from just under £20bn a year up to as much as £50bn depending on who you talk to, with the consensus being somewhere in the region of £30bn or £40bn.

The starting point for the chart is the official OBR projection that the Chancellor has already received. As we don’t have access to that, we have cribbed from the Institute for Fiscal Studies (IFS) Green Budget 2025 report, an independent ‘green paper’ pre-legislative report that provides an in-depth analysis of the economic and fiscal situation facing the UK that also takes a look at potential options available to the Chancellor.

Based on an updated economic forecast prepared by Barclays, the IFS think that the OBR’s March 2025 projected current budget surplus of £10bn in 2029/30 could be revised down to a projected current budget deficit of £12bn – a £22bn deterioration.

The numbers calculated by the IFS indicate £8bn lower tax receipts, £5bn higher debt interest, and £9bn higher current spending. The lower tax receipts and higher debt interest reflect a less favourable economic outlook than anticipated by the OBR back in March, while the latter consists of £1bn from the partial roll-back of cuts to the winter fuel allowance, £5bn from the failure to enact previously planned cuts to disability benefits, and £3bn from the effect of higher than previously forecast inflation on the uprating of the state pension and other welfare benefits.

If the OBR’s updated projections were to align with this scenario, then the Chancellor would need to find £22bn to get back to a projected current budget surplus of £10bn in 2029/30, assuming she decides again to give herself £10bn of headroom against her primary fiscal rule of a current budget balance.

We don’t know how these numbers compare with the numbers that the OBR are working on, but we do know that the OBR has been reviewing its assumptions for productivity growth, where it has proved consistently over-optimistic in previous forecasts. The IFS estimate that just a 0.1 percentage point downgrade in annual productivity growth would reduce the current budget balance by around £7bn in 2029/30, highlighting how sensitive the numbers are to relatively small changes. The IFS assume a downgrade of between 0.1 and 0.2 percentage points in their projection, although some rumours suggest the OBR has been considering a downgrade of as much as 0.3 percentage points.

The Chancellor has dropped a clear hint that she is going to abolish the two-child limit in the Autumn Budget as part of the government’s efforts to tackle child poverty, with the IFS and the Resolution Foundation both estimating that this could cost the exchequer between £3bn and £4bn a year by 2029/30. This would take the potential ‘hole’ up to £25bn.

For the purposes of the chart, I have also added in £5bn for further policy changes. Firstly, there is a good chance that the Chancellor will choose to make the existing 5p ‘temporary’ cut in fuel duties permanent at a cost of £2bn a year. This is currently scheduled to be reversed on 1 April 2026, alongside the expected end of the annual freeze in fuel duties – a measure that, if continued, could cost a further £3 billion a year by 2029/30.

The government is also under significant pressure – from President Trump and other NATO allies in particular – to accelerate increases in the defence budget to meet the new NATO target for spending on defence and security of 3.5% of GDP. Although the NATO target includes capital expenditure (which is not part of the current budget surplus or deficit), we have included a proxy amount of £3bn a year by 2029/30 for additional operating expenditure on defence.

This brings the potential funding requirement to roughly £30 billion, if the Chancellor aims to maintain £10bn of headroom against her fiscal rule of achieving a current budget balance in the fourth year of the forecast.

Unfortunately, as the government has discovered over the past year, such a small margin – less than 0.3% of GDP – is hugely problematic. Relatively small changes in the OBR’s assumptions or in actual economic performance can easily use up all the headroom, leading (as we have seen) to endless speculation about what the Chancellor is going to have to do to bring the public finances back under control.

The Chancellor is therefore expected to provide herself with a bigger cushion to reduce the risk of having to come back to raise taxes for a third time. The chart thinks she is likely to choose to double the level of headroom as a minimum – from £10bn to £20bn – with some economic commentators suggesting that an even larger cushion might be necessary.

The IFS point out in their report that extra headroom may be needed in any case because of the Chancellor’s second ‘debt’ fiscal rule, which is for public sector net financial liabilities to be falling as a share of GDP by the fourth year of the fiscal forecasts. Although she could cut the capital expenditure already budgeted for 2029/30 to remain within the fiscal rule, the Chancellor has said she wishes to avoid doing so.

Whatever happens, it looks like the Autumn Budget 2025 is going to be a pretty big deal.

This chart was originally published by ICAEW.

ICAEW chart of the week: Tax burden rising

My chart for ICAEW this week shows how tax receipts as a proportion of national income have risen significantly since the turn of the century, begging the question as to whether taxes are too high or the UK economy is too small?

ICAEW chart of the week: Table burden rising.

A line chart with a solid purple line for tax receipts/GDP (three-year moving average) and a dotted teal line for total receipts/GDP (three-year moving average).

Tax receipts/GDP (solid purple line) zigs and zags between 32% in 1999/00 to 32% in 2004/05 to 33% in 2009/10 to 33% in 2014/15 to 33% in 2019/20 to 35% in 2024/25 to 38% in 2029/30.

Total receipts/GDP (dashed teal line) broadly tracks the purple from 35% in 1999/00 to 42% in 2029/30.

17 Oct 2025. Chart by Martin Wheatcroft FCA.
Source: OBR, 'Public finances databank: Sep 2025'.

My chart of the week for ICAEW illustrates how tax receipts as a percentage of GDP averaged 32% over the three years to 1999/00, 32% to 2004/05, 33% to 2009/10, 33% to 2014/15, 33% to 2019/20, 35% to 2024/25 and are projected to hit 38% over the three years to 2029/30, based on data from the Office for Budget Responsibilities’ public finances databank for September 2025.

The chart also shows how total receipts including non-tax income averaged 35% in the three years to 1999/00 and a projected 42% to 2029/30.

The one caveat to these percentages is that they do not reflect recent revisions by the Office for National Statistics that increase GDP by the order of 1% across multiple years, which will cause the reported percentages to be a little smaller when they are recalculated by the OBR for the Autumn Budget 2025.

Either way, a projected rise of approaching 20% in the proportion of the economy taken in taxes since the end of last century is pretty significant, even if the projected tax burden will be lower than those of many countries in Europe.

The chart doesn’t show public spending as a proportion of national income. This averaged 35% of GDP over the three years to 1999/00 and 45% of GDP over the three years to 2024/25, with more people growing older driving up the cost of pensions, health and social care significantly and a much higher bill for debt interest being two of the main factors driving up costs.

Public spending as a share of national income is projected to fall slightly to an average of 44% over the three years to 2029/30 as the government tries to reduce the shortfall between total receipts and spending (aka the deficit) through a combination of higher taxes (as announced in the Autumn Budget 2024) and some constraint in public spending over the next five years.

Unfortunately, a lack of fiscal headroom, a disappointing economic outlook, and cost pressures are now expected to lead the Chancellor to increase taxes even further in the Autumn Budget 2025. This suggests that taxes may be too low, at least if the government is to deliver the level of public services and welfare provision it is committed to.

If taxes are not too high, then the problem must be that the economy is too small. This is evidenced by low productivity growth since the financial crisis and successive economic shocks that have together resulted in a UK economy that has not grown at anywhere near the speed it might have.

If tax cuts are unlikely, at least in the medium-term, the principal route to reduce the tax burden must be to drive up economic growth, as called for in ICAEW’s business growth campaign. This calls for the government to focus on business growth by addressing the many factors that make it too uncertain, too difficult and too expensive to do business in the UK.

This chart was originally published by ICAEW.

ICAEW chart of the week: Productivity

My chart for ICAEW this week looks at how productivity growth has slowed significantly over the past quarter of a century and asks what can be done to turn it around.

One of the biggest challenges facing the UK economy is the decline in productivity growth over the past quarter of a century as illustrated by my chart of the week for ICAEW. This shows how the average annual change over five years in quarterly output per hours worked in March 1980 was the equivalent of 2.1% a year higher than it was in the quarter to March 1975, five years earlier.

The chart also shows how output per hour rose by an annual average of 3.0% a year to March 1985, 1.7% to March 1990, 2.5% to March 1995, and 2.8% to March 2000.

Unfortunately, productivity growth has declined since then with quarterly output per hour increasing by an average of 1.6% a year over the five years to March 2005, 0.8% to March 2010, 0.2% to March 2015, 0.8% to March 2020 and 0.3% to March 2025.

These percentages go a long way to summarising how the UK economy has stalled since the start of the century, especially from the start of the financial crisis in 2007 through the austerity years, Brexit, the pandemic and the energy and cost-of-living crisis. We are producing less value per hour worked even as the population has grown and technology has further advanced.

While the crises we have gone through may partly explain some of the reduction in historical productivity growth over the last quarter of a century, the big question worrying many economists is why productivity has not returned to anywhere close to the levels seen before the turn of the century, or to even to those seen in the USA where, until recently, productivity growth has continued to hold up despite everything.

The Office for Budget Responsibility’s (OBR) most recent economic and fiscal forecast published in March 2025 was based on a central assumption of productivity growth averaging around 1.0% a year over five years to March 2030, significantly lower than the levels seen in the last century. There have been suggestions that the OBR intends to reduce this assumption when it updates its forecasts for the Autumn Budget 2025 in November, adding to the Chancellor’s headaches when she arrives at the despatch box.

One reason for the much lower levels of productivity growth this century may be the demographic change that has resulted in a much higher proportion of the population in retirement and a much older workforce on average. Another may be a question about whether the advent of the smart phone and ‘always on’ connectivity to the office has actually hindered rather than helped people be productive. A further reason could be the increasingly dire state of the public finances with debt rising from less than 35% of GDP in March 2005 to close to 95% of GDP, hampering the government’s ability to deliver the public services we need to thrive, in addition to raising the tax burden to historically high levels.

However, many of the reasons are likely to be driven by the challenges identified by ICAEW’s business growth campaign. This has identified how it has become increasingly too uncertain, too difficult, and too expensive to do business in the UK and calls for fundamental reform of tax, regulation and economic policy to support stronger business growth going forward.

Read more in ICAEW’s recommendations on how we can tackle the barriers to improving productivity in ICAEW’s business growth campaign.

This chart was originally published by ICAEW.

ICAEW chart of the week: climate change and the public finances

My chart for ICAEW this week looks at how climate change is now expected to make the OBR’s dire predictions for the public finances even worse.

A line chart on climate change and the public finances, with three curved lines for public sector net as a share of GDP over fifty years. with labels from March 2034 onwards.

Bottom line: Baseline public sector net debt/GDP. Falls from just under 100% of GDP to 90% of GDP in March 2034 and then rises to 100%, 130%, 188% and 274% of GDP in March 2044, 2054, 2064 and 2074 respectively.

Middle line: Baseline + climate change (below 3°C scenario). Rises from 94% of GDP in March 2034 (label not shown) to 114%, 157%, 235% and 348% of GDP in March 2044, 2054, 2064 and 2074 respectively.

Top line: Baseline + climate change + economic shocks. Rises from 104% in March 2034 to 134%, 187%, 275% and then 398% in March 2074.

18 Jul 2025. Chart by Martin Wheatcroft FCA. Design by Sunday. Sources: OBR, 'Fiscal risks and sustainability', Sep 2024 and Jul 2025 reports.

ICAEW’s chart of the week is on climate change this week, illustrating how it could add a further 74 percentage points to the Office for Budget Responsibility (OBR)’s already disheartening baseline projection for public sector net debt of 274% of GDP to reach 348% of GDP, or potentially 398% if economic shocks are included.

The baseline projection, published by the OBR in September 2024, showed public sector net debt as a proportion of the size of the economy falling from just under 100% of GDP to 90% of GDP in March 2034 and then rising to 100%, 130%, 188% and 274% of GDP in March 2044, 2054, 2064 and 2074 respectively.

One of the main drivers of the baseline projection is the expected rise in spending on pensions, health and social care as more people live longer, sometimes less healthy lives, combined with a falling fertility rate that means there will be proportionately fewer working age adults to pay the taxes needed to fund that rise.

Incorporating the OBR’s new central projection for climate change, public sector net debt would be 94% of GDP in March 2034 (not shown in the chart because of a lack of space between lines) and then 114%, 157%, 235% and 348% of GDP in March 2044, 2054, 2064 and 2074 respectively. Adding potential economic shocks on top would increase the projection for public sector net debt/GDP to 104% in March 2034 rising to 134%, 187%, 275% and then 398% in March 2074.

The September 2024 baseline projection included the loss of fuel duty receipts from the phasing out of petrol and diesel vehicles between now and 2050, but the OBR in its recent July 2025 fiscal and sustainability report has looked in more detail at both the incremental costs of transitioning to net zero and the damage that is likely to result from a much warmer and wetter climate in several different scenarios.

OBR’s central ‘below 3°C’ scenario is based on global average temperatures rising by 2.9°C above pre-industrial levels by 2100, of which weather and other damage associated with a much warmer and wetter climate is projected to add 17 percentage points to accumulated debt over the next half century from direct and indirect costs and revenue losses. Climate damage is also expected to result in slower economic growth that would add 27 percentage points over 50 years by reducing the denominator in the debt to GDP ratio. The government’s share of transition costs (including lower tax receipts from higher private sector spending) is projected to add 7 percentage points, while there is a 22 percentage point impact from the incremental debt interest that would be incurred on a higher level of debt.

This is before taking account of recessions and other potential economic shocks, which based on historical patterns are expected to add 10% of GDP to public sector net debt every decade or so.

The chart does not reflect other risks identified by the OBR in its latest report, where it reports that the exposures to the public finances have increased since its assessment last year. One risk they did look at in some detail is the prospect of higher interest rates on government borrowing on the basis that demand for gilts reduces as the Bank of England winds down its holdings of gilts (quantitative tightening) and defined benefit pension schemes gradually sell their holdings of gilts to fund pension payments. This risk might be mitigated by selling shorter-dated gilts, although shorter maturities would make the public finances less resilient by increasing the amount of debt needing to be refinanced each year.

The OBR’s dismal assessment of the prospects for the public finances highlights just how difficult a financial position the UK finds itself in, with a lot to do (and some luck needed) if it is to be restored to a sustainable path. At the same time, the costs of climate change are now becoming that much more apparent as extreme weather events and other climate-related costs start to show up in public finance and insurance data.

For more information about the role of the accountancy profession in climate change, visit ICAEW’s climate hub.

This chart was originally published by ICAEW.

OBR: deficit could reach £273bn or more

15 April 2020: a report from the Office for Budget Responsibility (OBR) indicates that the fiscal deficit could increase to £273bn in 2020-21, but it cautions that this is only one of many plausible scenarios.

The OBR has produced its first analysis of the potential economic and fiscal impact of the coronavirus, based on a three-month lockdown followed by restrictions for a further three months.

At the same time, the International Monetary Fund has warned that the global economic contraction underway is likely to be the worst since the Great Depression, dwarfing the financial crisis twelve years ago.

In its ‘coronavirus reference scenario’, the OBR indicates that the UK economy could fall by 35% in the second quarter of 2020, before bouncing back to leave the economy 13% smaller in 2020 than in 2019.

The consequence would be an increase in the deficit for the fiscal year ending 31 March 2021 to £273bn or 14% of GDP, while public sector net debt could be £384bn higher than budgeted for, reaching £2.2tn or 95% of GDP by the end of the fiscal year.

The OBR says that the economic impact of the coronavirus will derive much less from people falling ill or dying, than from the public health restrictions and social distancing required to limit its spread, severely reducing demand and supply at the same time. That means lower incomes, less spending and weaker asset prices, all of which reduce tax revenues, while job losses will raise public spending.

Once the crisis has passed and policy interventions have unwound, the OBR thinks that annual borrowing could return to roughly the Spring Budget 2020 forecast. However, net debt would continue to be much higher, potentially £260bn (10% of GDP) more than the baseline forecast by 31 March 2025.

The OBR analysis assumes that increased public spending, tax cuts and holidays, loans and guarantees, and actions taken by the Bank of England, designed to support household incomes and to limit business failures and layoffs, will help prevent greater economic and fiscal damage in the long term. However, it warns that the longer the disruption lasts, the more likely it is that the economy’s future potential output will be ‘scarred’ with adverse consequences for future deficits and for fiscal policy.

The International Monetary Fund (IMF) now predicts that the global economy will contract by 3.0% in 2020, much worse than the 0.1% contraction seen during the financial crisis in 2009 and a cut of 6.3% from its previous prediction in January. The IMF prediction is based on a shallower, but longer recession than the OBR’s scenario for the UK. Overall, the IMF believes that the cumulative output loss in 2020 and 2021 from the pandemic could be as much as $9tn.

Alison Ring, Director, Public Sector for ICAEW, commented: “The analysis published by the OBR is not a forecast, but the scenario it presents is pretty startling; making clear that whatever actually happens, the damage to public finances from the coronavirus pandemic will be extremely severe.

“While the OBR suggests that the economy and tax receipts could recover relatively quickly, the additional debt burden will weigh on the public finances for many years for come.”

Fiscal deficit 2020-21: £55bn Spring Budget +£130bn lower receipts +£88bn higher spending = £273bn Reference scenario. Net debt: £1,819bn +£384bn = £2,203bn.

This article was originally published by ICAEW.

ICAEW chart of the week: Forecast deficit doubles in a week

20 March 2020: Emergency spending measures added to Spring Budget measures drives forecast deficit for 2020-21 to double in a week.

Forecast deficit pre-budget £40bn + Budget £15bn = OBR forecast £55bn - base rate £3bn + Covid I £12bn + Covid II £20bn = Latest forecast £84bn

20 March 2020. Chart research by Martin Wheatcroft FCA, design by Sunday. ©ICAEW 2020
Source: HM Treasury, ‘Spring Budget 2020’, and emergency announcements on 11 and 17 March 2020.

Three fiscal events within a period of a week is pretty much unprecedented. Two of these were on Wednesday 11 March when an expansionary Spring Budget was accompanied by a £12bn package of emergency measures. Less than a week later, the Chancellor announced a £20bn package of additional financial support, together with an initial £330bn in loans and guarantees to keep the economy operating.

As the #icaewchartoftheweek illustrates, this means that the forecast deficit for 2020-21 has more than doubled, from £40bn before the Budget to £84bn now.

It looks increasingly likely that the fiscal deficit in the coming year will exceed £100bn, potentially by a significant margin. Just a 2% drop in tax revenues would be enough to take the deficit over that level, even before the impact on welfare spending of job losses and income reductions, or the cost of writing down any loans or guarantees that are not repaid. Further financial support packages from the Chancellor over the weeks and months ahead are also likely.

Sit tight. This is going to be a bumpy ride for the public finances.

This chart was originally published by ICAEW.

ICAEW chart of the week: Post-GE2019 fiscal deficits

With the General Election now complete, the Office for Budget Responsibility (OBR) was able to release a restated version of its March 2019 fiscal forecasts this morning, reflecting technical revisions to the way the fiscal numbers are calculated, in particular that of student loans. This enables us to update the numbers set out our GE2019 Fiscal Insight on the party manifestos as best we can, given that the OBR has not deigned to include either the changes to public spending announced in the Spending Round 2019 nor the tax and spending changes in the Conservatives manifesto.

As illustrated by the #icaewchartoftheweek, the revised baseline forecast for the fiscal deficit is now £50bn for the current fiscal year, followed by £59bn next year in 2020-21, £58bn in 2021-22 and 2022-23 and £60bn in 2023-24.

It was frustrating that the OBR scheduled their publication of these revised numbers for the first day of the General Election purdah period making it vulnerable – as happened – to being pulled. A day earlier and that would not have happened! Ideally, these revisions would have been published as soon as practical after the publication by the ONS of their revisions to historical numbers in September.

It would have been even better if the OBR had been able to update their economic forecast too, given that the current baseline is still based on an economic and fiscal analysis from nine-months ago. With weak economic growth over the first half of the financial year, it is likely that the OBR will cut its forecasts for tax revenues over the forecast period when it does get round to updating them, resulting in higher deficits – even before taking account of suggestions that the Conservative GE2019 winners plan to announce a splurge of more capital expenditures in the Spring Budget in February.

Unfortunately, we won’t see an updated long-term forecast until at least July 2020, when the OBR is scheduled to publish its next fiscal sustainability report on the prospects for the public finances.