Public finances: Borrowing undershoot a drop in the ocean

21 June 2024

Thomas Pugh, economist at leading audit, tax and consulting firm RSM UK, said: 'Public sector net borrowing, excluding public sector banks, of £15bn in May, combined with a significant downward revision to April’s borrowing to £18.4bn, means that in the first two months of the financial year, borrowing has undershot the forecast the OBR made in March by about £3.3bn. That will make things a little easier for the new government but given the scale of the fiscal squeeze coming in the next parliament it is a drop in the ocean.

'Given that the current tax and spending plans look extremely difficult to fulfil, the new government is going to have to raise more in taxes, or borrow more. Simply keeping non-protected departments budgets stable in real terms will add an extra £20bn to government spending. With both main parties having ruled out tax raises to the three main revenue raisers, income tax, national insurance and VAT, and having signed up to similar fiscal rules, the next government has a very tough balancing act to perform to avoid another dose of austerity for already stretched government departments.'