Government spending and borrowing have defied expectations, leading to «perilous» public finances and increasing pressure on the chancellor to consider raising taxes or cutting spending. In the latest official figures, government borrowing last month exceeded expectations by £15 billion compared to the previous year, resulting in a higher deficit than economists had predicted.
The Office for National Statistics reported that in February, the gap between government revenue and spending was £10.7 billion, with spending surpassing forecasts and tax revenue falling short. This amount marks the fourth-highest deficit since records began in 1993, exceeding economist predictions by £4.1 billion.
Independent forecasters, such as the Office for Budget Responsibility (OBR), have noted that tax revenues have been lower than anticipated. Tax receipts are currently £11.4 billion below the OBR forecast for the financial year, while borrowing is £20.4 billion higher than expected.
Compared to last year, government borrowing has increased significantly, with the ONS data showing a rise from £117.5 billion to £132.2 billion, representing a £15 billion increase. This news comes just before Chancellor Rachel Reeves is set to provide an update on the state of the British economy in her upcoming spring statement.
The recent revision of the surplus reported last month, down by £2.1 billion, has further exacerbated the financial challenges. Respected think tank, the Resolution Foundation, has described the public finances as being in a «perilous» state, indicating the need for potential spending cuts and tax increases.
Analysts from Pantheon Macro suggest that cuts will be announced during the spring statement next week, while tax rises are expected to be introduced in the October budget. The Resolution Foundation warned that if the economy does not show signs of improvement soon, tax increases may become necessary.
In response to the concerning figures, Chief Secretary to the Treasury Darren Jones emphasized the government’s commitment to scrutinizing every taxpayer penny meticulously to ensure sound public finances. He stressed the importance of adhering to fiscal rules and stated that the government will prioritize securing Britain’s future without compromising the integrity of public finances.
SOURCE