Each month I write an article for ICAEW on the monthly public sector finance release. Here are my most recent articles:
Public sector net debt hits £3tn ahead of budget
Rising inflation and budget overruns provide a difficult backdrop for John Healey as he prepares for his first fiscal event. The Chancellor is under pressure to provide more support for rising energy bills, but the challenges to balance spending are mounting.
Budget overrun widens as public finances disappoint
The triple whammy of geopolitical uncertainty, persistent inflation and rising gilt yields are squeezing the public purse as the Chancellor prepares for his first budget.
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UK net debt in touching distance of £3.0tn
Latest data confirms that the UK’s public finances remain weak, despite taxpayers facing the highest tax burden since the 1960s. The Chancellor faces significant challenges if he is to increase public spending, says ICAEW.
Our chart this week looks at how the five-year fiscal forecasts have consistently proved too optimistic in recent years, something to bear in mind as the budget approaches.
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Chart of the week: disposable income
Our chart this week looks at how income is distributed across UK households with a median equivalised household disposable income of £3,265 per month and an equivalised average of £3,800 per month.
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Chart of the week: UK productivity remeasured
Our chart this week looks at how the ONS is changing how it calculates labour productivity – one of the most important factors driving economic growth.
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Chart of the week: public sector workforce
Our chart this week looks at how one third of the 6.2m public sector workforce work for the NHS while 9% work for the Civil Service.
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Chart of the week: OBR long-term fiscal forecast
Our chart this week shows how alternative scenarios go off the chart in the OBR’s latest long-term fiscal projections.
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Chart of the week: long-term interest rates
Our chart this week highlights how long-term borrowing costs have changed over the past year in Japan, Germany, France, the US and the UK.
My chart this week for ICAEW is on how GDP for the UK reached £3.0tn for the first time in 2025. This is a 58% increase over the course of a decade, mostly driven by a combination of inflation and a rising population, resulting in a relatively small amount of per capita economic growth.
My chart of the week for ICAEW is on gross domestic product (GDP), the principal measure used by statisticians and economists to assess the size of the economy.
The chart shows how nominal GDP (GDP at market prices in current values) was £1.9tn in 2015, rising to £2.0tn in 2016, £2.1tn in 2017, £2.2tn in 2018 and then £2.3tn in 2019. Nominal GDP fell to £2.1tn in 2020 (the first year of the pandemic) and then rose to £2.3tn in 2021, £2.6tn in 2022, £2.8tn in 2023, £2.9tn in 2024 and then £3.0tn in 2025.
This is a cumulative increase of 58% over 10 years (or 4.7% a year on average), based on nominal GDP of £1,928bn in 2015 and £3,040bn in 2025.
The chart also shows the increase is much less dramatic using GDP adjusted for inflation (GDP at market values on a chained volume basis or ‘real GDP’). Recalculated into 2025 values, GDP adjusted for inflation was £2.7tn in 2015, £2.9tn in 2019, £2.4tn in 2020 and just under £3.0tn in 2022.
As ever with economic statistics these numbers are all subject to revision as the ONS obtains new or updated data and, every so often, revises its methodology.
Analysing the increase
The 58% increase in nominal GDP over the 10 years to 2025 can be analysed as a cumulative 38% increase from inflation (using the GDP deflator ‘all economy’ measure of inflation) and cumulative economic growth of 14%, with the latter being further analysed into a cumulative 7% increase in the size of the population, and a cumulative 7% increase in average economic activity per person.
This is equivalent to a 4.7% per year average annual increase in nominal GDP over the decade, comprising 3.3% per year in average annual inflation and 1.3% per year in economic growth. The latter comprises a 0.7% per year annual rise in population and a 0.7% increase in average per capita economic activity.
Economic growth has been particularly weak over the past three years in particular, with a cumulative increase of 17.8% in nominal GDP comprising cumulative inflation of 14.6% and a cumulative increase of 2.8% in GDP adjusted for inflation (from £2,958bn in 2022 adjusted to 2025 prices to £3,040bn in 2025).
As the population is estimated to have increased by 2.7% between 2022 and 2025, per capita economic activity over the same period has in effect been flat over the last three years.
Unfortunately, the outlook for the economy is far from rosy given recent international developments and there is now a risk that nominal GDP could fall back below £3.0tn in 2026, despite what is likely to be a higher rate of inflation than previously anticipated.
My first chart of the financial year starting 1 April 2026 for ICAEW looks at the government’s £1.4tn budget for 2026/27.
My chart fir ICAEW this week is on the public sector budget for the 2026/27 financial year which began on 1 April 2026, showing how there is expected to be a shortfall of £116bn between anticipated receipts of £1,304bn and planned spending of £1,419bn.
This is equivalent to a deficit of 3.6% of GDP, calculated as receipts of 41.2% of GDP less total managed expenditure of 44.8% of GDP.
The chart highlights how the top 10 taxes are expected to generate £1,050bn (81% of total receipts), with all other taxes contributing £121bn (9%) and other receipts generating £133bn (10%).
The top 10 taxes comprise: income tax which generates £360bn, VAT (£220bn), employer national insurance (£155bn), corporation tax (£102bn), employee and self-employed national insurance (£57bn), council tax (£54bn), business rates (£37bn), fuel duties (£24bn), capital gains tax (£21bn) and property transaction taxes (stamp duty in England) generating £20bn.
The remaining £121bn of tax receipts comprises £84bn from the next 10 largest taxes: environmental duties (£16bn), alcohol duties (£13bn), vehicle excise duty (£10bn), inheritance tax (£9bn), insurance premium tax (£9bn), tobacco duties (£7bn), air passenger duty (£5bn), stamp duty on shares (£5bn), customs duties (£5bn) and the apprenticeship levy (£5bn), and £37bn from all other taxes and duties.
Other receipts comprise £87bn from operating surpluses (including social housing rents and the profits of public corporations), £43bn in interest and dividends (on investments and cash balances), and £3bn other receipts.
On the spending side, the chart illustrates how the £749bn budgeted for health and welfare is more than half of the total (approximately 53%), while education spending is budgeted to be £151bn (11%), public services outside of health, social care and education amount to £388bn (27%) and interest is forecast to be £131bn (9%).
Health and welfare spending comprises £401bn on welfare (including the state pension), £294bn on health (principally the NHS), and social care provision of £54bn. Budgeted spending on public services outside of health, social care and education include defence and security of around £70bn, transport £69bn, public order and safety £62bn, industry, agriculture and employment £56bn, and housing and environment £51bn, together with £80bn across the hundreds of other public services provided by central and local government.
The planned borrowing to fund the deficit of £116bn, the difference between receipts and total managed expenditure, excludes £15bn in other borrowing to fund government lending activities and working capital movements, with public sector net debt scheduled to rise above £3tn during the coming financial year.
The problem for the Chancellor – and for all of us – is that the actual numbers for 2026/27 could be significantly worse from the budgeted amounts presented in our chart. Not only is she already under significant pressure to increase defence spending and alleviate student loans (amongst many other spending challenges), but the conflict with Iran will make the situation even more challenging for both the government and the nation.
On that cheery note, we would like to wish you all the best for the new (financial) year.
My chart for ICAEW this week looks at how the Chancellor’s fiscal headroom increased by £2bn to £24bn in the latest fiscal forecast from the Office for Budget Responsibility.
The Chancellor presented the latest fiscal forecast prepared by the Office for Budget Responsibility (OBR) to Parliament on Tuesday 3 March 2026 together with an extensive defence of the government’s economic record since taking office almost two years ago.
The good news for the Chancellor was that she was able to report that the fiscal headroom against her primary fiscal rule has increased from £22bn in the Autumn Budget 2025 to £24bn in the Spring Forecast.
My chart for ICAEW this week illustrates the components of this change, with forecast revisions by the OBR adding £8bn to the projected budget surplus in 2029/30 – the fourth year of the forecast period – before deducting £6bn for the net cost of policy announcements made by the government since November last year.
The forecast revisions start with £9bn in higher tax receipts, of which £6bn relate to higher equity prices boosting projected capital gains tax and carried interest income tax receipts and £3bn to other tax receipts, primarily from stronger economic growth predicted by the OBR between 2027 and 2030.
A further £2bn of uplift comes from lower debt interest charges in 2029/30 as a consequence of a reduction in the OBR’s predictions for inflation and interest rates.
This was then offset by £3bn from other changes to the forecast for current expenditure, including £1bn in higher welfare spending and £2bn for other reasons.
The £6bn (£5.7bn before rounding) net cost of policy decisions comprised £4.4bn in extra SEND funding as announced by the government eight days before the Spring Forecast and £0.5bn in other spending increases announced since last November – a total of £4.9bn in additional spending in 2029/30. This was partially offset by additional council tax increases of £0.5bn before taking account of tax cuts in 2029/30 of £0.7bn for US-parented groups, £0.1bn relating to inheritance tax on farmers, £0.2bn in other tax cuts and a £0.3bn indirect impact on receipts from policy decisions.
Not shown in the chart is net investment, where the OBR reduced the projection for 2029/30 by £3bn from £90bn to £87bn. This means the projected fiscal deficit for 2029/30 has reduced from £68bn (a previously projected current budget surplus of £22bn less £90bn net investment) to £63bn (a current budget surplus of £24bn less £87bn).
Reacting to the Spring Forecast, ICAEW’s Chief Executive, Alan Vallance, said: “While businesses will be relieved that they will not have to respond to any major policy announcements from the Chancellor, their attention will be turned to the situation in the Middle East. In an increasingly volatile world, having just one fiscal event a year is the right move to dampen speculation and increase certainty.
“Our members tell us that they want stability, but since these forecasts were finalised, the world has again changed. People and businesses will be concerned about the impacts of more geopolitical uncertainty, and it is inevitable that costs, particularly energy costs, will rise.
“This unfolding crisis underscores the need to foster a more stable and supportive environment for business, including developing a long-term fiscal strategy that puts the public finances on a more sustainable path and an urgently needed commitment to comprehensive tax reform.”
This week’s chart looks at how the government is relying on a strong inflow from self-assessment and employee bonuses to meet its revised fiscal targets for the financial year to March 2026.
Our chart this week illustrates the financial results for the UK public sector before net investment expenditure over the twelve quarters to March 2026, including the latest Office for Budget Responsibility (OBR) forecast for the final quarter.
According to the Office for National Statistics (ONS), the full-year current budget deficit – current receipts less current spending including depreciation – was £66bn in 2023/24 and £76bn in 2024/25, while the latest OBR forecast is for a current budget deficit of £52bn for 2025/26.
The current budget balance is different to the headline deficits of £135bn, £152bn and the OBR forecast of £138bn for 2023/24, 2024/25 and 2025/26 as deficits also include net investment spending of £69bn, £76bn and £86bn respectively.
Our chart breaks the current budget balance down by quarter, showing how there were current budget deficits of £44bn, £16bn and £27bn in the first three quarters of 2023/24 and a surplus of £21bn in the fourth quarter of 2023/24. This was followed by current budget deficits of £39bn, £22bn and £35bn and a current budget surplus of £20bn in 2024/25.
Current budget deficits of £50bn, £23bn and £22bn were reported for the first three quarters of the current financial year, with the OBR forecasting a current budget surplus of £42bn in the final quarter. This would bring the total current budget deficit to £53bn, £1bn more than the OBR’s November 2025 full-year forecast of £52bn because of variances in the third quarter.
As the chart illustrates, there is a £64bn swing between a current budget deficit of £22bn in the third quarter of 2025/26 to a current budget surplus of £42bn in the fourth quarter.
This quarter-on-quarter swing can be analysed between:
a £46bn contribution from 2024/25 self-assessment tax returns, most of which were submitted in January 2026 (£28bn income tax and £18bn capital gains tax);
£20bn from higher PAYE income tax and national insurance receipts (principally driven by employee bonuses and first calendar quarter pay rises);
£5bn from lower interest charges (as interest rates and inflation have fallen); less
a net £7bn swing in all other receipts and expenditures across central and local government and public corporations.
The £64bn swing this year is higher than the £55bn swing between the third and fourth quarters of 2024/25. The difference is mainly due to an anticipated £7bn extra from capital gains taxes, principally driven by the rate increases that took effect in October 2024, half-way through the self-assessment tax return period.
The lower current budget deficit in the third quarter compared with a year previously is primarily because of the employer national insurance tax rise from 1 April 2025. This rise also benefited the first quarter of 2025/26 but that was offset by much higher interest charges (principally on inflation-linked debt) amongst other drivers.
Some of the benefit of the swing in the current budget balance in the fourth quarter of the current financial year will be offset by higher net investment spending in the typical end-of-year ‘capital rush’. However, the achievement of the £138bn revised deficit forecast for the current year is primarily in the hands of the taxpayers who submitted their tax returns in January and how well employers operating on a calendar performance year basis did in 2025 and hence the bonuses that they will pay out by the end of March.
We will hope to get a sense of the position in self-assessment tax returns when the January public sector finances are published by the ONS later this month, but we will likely need to wait until April (when the March public sector finances are published) to fully understand what is happening with bonuses.
My chart for ICAEW marks Australia Day by looking at the federal government balance sheet over the last decade.
My chart for ICAEW marks Australia Day by looking at the federal government balance sheet over the last decade.
Australia Day is on Monday 26 January, prompting us take a look at the Australian Government’s consolidated financial position over the last 10 years.
The chart is derived from federal government consolidated financial statements prepared in accordance with Australian Accounting Standards (as adjusted for prior period adjustments), divided by annual estimates of GDP in current prices published by the Australian Bureau of Statistics in October 2025.
The chart shows how net worth was negative throughout the period, going from 18% of GDP on 30 June 2015 to 23% on 30 June 2025.
Other key stats from the balance sheet
Non-financial assets going from 10% on 30 June 2015 to 11% on 30 June 2025
Financial assets going from 24% on 30 June 2015 to 27% on 30 June 2025
Interest bearing liabilities going from 28% on 30 June 2015 to 36% on 30 June 2025
Provisions and payables going from 24% on 30 June 2015 to 25% on 30 June 2025
Financial assets of AU$753bn on 30 June 2025 comprised of AU$570bn in financial investments, AU$174bn in receivables and accrued revenue, and AU$9bn in cash. While non-financial assets of AU$320bn comprised of AU$94bn in military equipment, AU$96bn in other plant, equipment and infrastructure, AU$79bn in land and buildings, AU$17bn in intangibles, AU$13bn in inventories, AU$13bn in heritage and cultural assets, and AU$8bn in other non-financial assets.
Interest bearing liabilities of AU$1,009bn on 30 June 2025 comprised of AU$679bn in government securities, AU$216bn in central bank and other deposit liabilities, AU$58bn in loans, AU$33bn in leases and AU$23bn in other interest-bearing liabilities. While provisions and payables of AU$696bn comprised of AU$411bn in pension liabilities, AU$103bn Australian currency in issue, AU$50bn in payables and AU$132bn in provisions.
Net worth was -AU$632bn on 30 June 2025 and GDP in the year to 30 June 2025 was AU$2,779bn. (Australian balance sheet to GDP ratios are based on GDP for the preceding 12 months, rather the UK practice of using ‘mid-year’ GDP from 6 months before to 6 months after the balance sheet date).
Nominal GDP has increased by 70% or an average of 5.5% a year over the past decade, comprising inflation of 3.2% a year on average and average economic growth of 2.2% a year. The latter reflects average population growth of 1.5% per year and average per capita economic growth of 0.75% per year.
Not shown in the chart are revenues as a share of GDP respectively in the 10 financial years from 24% in 2015/16 to 27% in 2024/25, expenditure of 27% in 2015/16 to 29% in 2024/25, and net accounting (deficits)/surpluses as a share of GDP of (2.4%) in 2015/16 to (1.5%) to 2024/25. Net investment averaged 0.5% of GDP over the ten years.
This is of course not the full picture of the Australian public finances, as these numbers exclude approximately AU$1.7tn of positive net worth in the balance sheets of states and territory governments and local authorities across Australia.
Overall, Australia’s overall general government net debt – including states, territories and local government, but excluding illiquid financial assets, non-financial assets and non-debt liabilities – is reported to be around 32% of GDP in 2025. This compares with around 95% of GDP for the UK according to the IMF.
Apart from the pandemic years – when deficits rose and GDP fell in real terms – what is remarkable is how stable the Australian Government balance sheet has been over the last decade when compared with the size of the Australian economy.
This has been partly down to the continued growth of Australia’s sovereign wealth funds (the Australia Future Funds) and the decision to close federal defined benefit pension schemes to new members in 2005 (non-military) and 2016 (military), slowing the growth in these liabilities. It also reflects a relatively prudent fiscal stance over the last few decades by successive governments.
For the Australian Government, this is a positive financial position to be in.
My chart for ICAEW this week returns to the scene of the Budget as it publishes an in-depth analysis written by me on its effect on the public finances and how it was ‘all about the headroom’.
Now that the dust has settled on November’s Budget, ICAEW has published a 20-page in-depth Fiscal Insight report written by me on the government’s most recent fiscal event and what it means for public finances.
One of the key conclusions of the report is that this Budget was ‘all about the headroom’, with the Chancellor’s tax rises almost entirely devoted to improving the buffer against potential adverse economic developments.
Although the government does not have an explicit long-term fiscal strategy, it does have medium-term strategic objectives to end the use of borrowing to fund current spending and to stop public debt from rising faster than the size of the economy.
These aims are embodied in fiscal targets that are intended to provide confidence to debt markets about the government’s commitment to keeping public finances under control. The Chancellor’s primary ‘stability’ fiscal rule targets a current budget surplus by 2029/30 – the fourth year of the fiscal forecast period – as illustrated by Figure 3.
In theory, this rule prevents the government borrowing to fund current spending and reduces the incentive inherent in previous fiscal rules to attempt to ‘balance the books’ by cutting investment.
Budget 2026 later this year will reduce the fiscal target to three years. This is a major improvement as it aligns with the three-year spending review period and hence should significantly reduce the scope for ‘playing with spreadsheets’ to meet fiscal targets.
The tightening in this fiscal rule is accompanied by a slight relaxation in the target: instead of aiming for a current budget surplus, the rule now allows a maximum current budget deficit of up to 0.5% of GDP. This should provide the Chancellor with around £17bn in additional headroom on top of the existing £22bn she has this year, before taking account of changes in the fiscal forecasts or policy decisions in 2026.
This is likely to mean that her secondary fiscal rule – requiring projected debt to start falling by 2029/30 – will become more important in determining whether she will meet her fiscal commitments next year.
It is generally accepted that the Chancellor left herself with too small a level of headroom against her fiscal rules in the Autumn Budget 2024. This left the government vulnerable to relatively small swings in economic circumstances and also constrained the government’s ability to spend more on defence or other emerging priorities.
The need to respond to a deterioration in the fiscal forecasts saw the Chancellor cut planned welfare spending in the Spring Statement, followed by hugely damaging speculation about potential tax rises in the run up to Budget 2025 following the overturning of those cuts by Labour MPs.
Although the level of headroom is still not that high by historical standards, the additional £17bn of headroom she is scheduled to benefit from in next year’s Budget should provide her with more resilience to weather further deteriorations in the economy if needed
Our chart this week illustrates the fall, rise and fall again of net inward migration over the past eight years and asks whether it will bounce back to hit the OBR’s long-term assumption by the end of the decade.
The eight-year period presented in our chart this week has seen significant change in the movement of people to and from the UK. The end of free movement for citizens of EU and EFTA countries (other than Ireland) after Brexit was followed by the introduction of a points-based immigration system, disruption to international movements of people caused by the pandemic, the resettlement of significant numbers of Ukrainians, Afghans and Hong Kong British Overseas Subjects, and then a clamp-down on immigration at the end of the last government that has continued under the current government.
These factors can be seen in the provisional and otherwise heavily caveated numbers from the Office for National Statistics (ONS) illustrated by the chart. Overall net inward migration fell from 216,000 and 224,000 in the years to June 2018 and 2019 to 111,000 in the year to June 2020, rose to 251,000, 681,000 and 924,000 in the years to June 2021, 2022, and 2023 respectively, and then fell to 649,000 and then 204,000 in the years to June 2024 and 2025. A net total over eight years of 3,260,000 additional people living in the UK.
Not shown on the chart are the gross totals for immigration and emigration over the eight years to June 2025, with the former adding up to +7,962,000 (757,000, 821,000, 736,000, 818,000, 1,167,000, 1,467,000, 1,299,000 and 897,000 respectively) and the latter to -4,702,000 (541,000, 597,000, 625,000, 567,000, 486,000, 543,000, 650,000 and 693,000).
The chart highlights net inward migration from outside the European Union single market area was a key driver over the eight years to June 2025 with 3,683,000 net additions to the UK population (142,000, 180,000, 115,000, 243,000, 750,000, 1,045,000, 825,000, and 383,000 respectively). Over the same period, net immigration from the EU and EFTA countries turned into net emigration, reducing the net additions to the UK population to 287,000 (+158,000, +126,000, +70,000, +95,000, -1,000, -30,000, -61,000 and -70,000), while there was a contraction and then expansion in the 710,000 net number of Brits leaving the UK to live abroad (84,000, 82,000, 74,000, 87,000, 68,000, 91,000, 115,000, and 109,000).
The large rise and then sharp fall in net inward migration in the last five years of the chart up to June 2025 was mainly driven by those coming from outside the EU and EFTA. Net inward migration in this group for work-related reasons (including dependents) increased and then fell over the five years to June 2025 (59,000, 184,000, 359,000, 381,000, 107,000), while those arriving for study-related reasons (including dependents) also rose and fell (59,000, 265,000, 382,000, 244,000, 144,000).
Net long-term arrivals under resettlement schemes, principally from Hong Kong, Afghanistan and Ukraine, also rose and fell in the five years to June 2025 (10,000, 151,000, 125,000, 52,000 and 21,000), while the net inflow of asylum seekers increased over the same period (38,000, 70,000, 84,000, 77,000 and 90,000).
The chart includes the OBR’s long-term assumption in Budget 2025 for net inward migration to recover to 340,000 a year by the end of the five-year forecast period in 2030/31. As the OBR calculates that most immigrants make a net positive contribution to the UK economy in the years following their arrival, a lower net inflow of people into the UK than projected could have an adverse impact on the amount of headroom the Chancellor has against her fiscal rules.
So, while ministers and civil servants at the Home Office may be congratulating themselves about the sharp fall in the number of people coming to live in the UK, their colleagues at HM Treasury may be less cheerful.
My chart for ICAEW this week illustrates how despite being a “tax-raising Budget”, the cumulative net effect of all the changes announced last week is to add £61bn to the public sector net debt forecast for 31 March 2030.
While my chart for ICAEW last week looked at the impact of Budget 2025 on 2029/30, the fourth year of the fiscal forecast used for the Chancellor’s fiscal rules, this week’s focus is on the cumulative effect of the changes made between now and 31 March 2030.
The first four bars of our step chart analyse the OBR’s forecast revisions, starting with extra borrowing to fund the expected budget overrun in the current financial year (2025/26) of £18bn (technically a £21bn higher deficit less a £3bn opening adjustment). This is followed by more borrowing to fund higher local authority spending of £26bn over four years (an average of £6.5bn a year) and to cover cumulative lower receipts of £35bn from downgrading the productivity growth assumption (£2bn a year rising to £16bn by 2029/30). This is then offset by £28bn over four years from the impact of inflation and wage growth on receipts exceeding the impact of inflation and other cost pressures on public spending.
Borrowing over the next four years is then increased by £19bn (just under £5bn a year on average) to cover the government’s welfare reversals over the summer – the restoration of the winter fuel allowance to many pensioners and the decision not to proceed with eligibility restrictions for disability benefits that were needed to make the Spring Statement add up.
The decision to lift the two-child benefit cap adds another £10bn (£2.5bn a year on average) to projected debt over the next four years, while other policy measures and working capital movements are expected to add £17bn (£11bn and £6bn respectively) on top of that.
A £36bn net reduction in debt from higher tax receipts net of indirect effects over the next four years (zero in 2026/27, £4bn in 2027/28, £10bn in 2028/29, and £22bn in 2029/30) reduces the cumulative impact to £61bn, with the £3,391bn forecast for 31 March 2030 at the time of the Spring Statement back in March 2025 being revised up to £3,452bn in the Autumn Budget 2025.
Perhaps the most surprising aspect of this analysis is the £26bn revision to the forecast for local government spending. While not as large as the well-publicised impact of productivity downgrades on the OBR’s fiscal forecast, it highlights some fundamental bookkeeping issues in how the government manages the public finances. A monthly financial consolidation process that excludes local government, schools and many other public bodies means the Office for National Statistics (ONS) and HM Treasury rely on forecasts and estimates instead of actual data when reporting the monthly public sector finances, exacerbated by the use of the four different accounting frameworks across the public sector and the local audit crisis in England that has created a large backlog in local authority audited financial statements.
The OBR states: “Recent substantial revisions to LA borrowing estimates and outturns, which reflect ongoing challenges in obtaining timely and high-quality estimates particularly for expenditure by local authorities. The ONS, the Ministry of Housing, Communities and Local Government, the Treasury and the OBR have formed a joint Local Government Financial Information Taskforce to investigate and address these concerns, with the overall objective of improving the flow of data to the ONS and the accuracy of our forecast.”
Meanwhile, the backloading of tax rises means that although the forecast is for a current budget surplus in 2029/30 and for a reduced overall deficit in that year, the summer welfare reversals, lifting of the two-child benefit cap, and other policy changes all require more borrowing before the tax rises kick in.
The 2025 Budget provides very mixed messages about the UK public finances’ prospects. There is more borrowing over the next three years before tax rises fully kick-in, while at the same time there are significant risks that mean the government could be back here again next year or the year after to ask for more money.
If ever a Chancellor could really do with some good economic news, it is probably in the coming year.
