Doubts have been raised over the government’s ability to unveil tax cuts ahead of the next general election after official figures revealed borrowing was higher than expected in the past year.
The Treasury borrowed £120.7bn in the financial year ending March 2024 – down £7.6bn from the year before, according to provisional estimates from the Office for National Statistics (ONS).
However, the figure is £6.6bn more than forecast by the Office for Budget Responsibility (OBR) only a month ago.
Overall, government debt was around 98.3% of the UK’s annual gross domestic product (GDP) in March – up 2.6 percentage points from the previous year and at levels not seen since the early 1960s.
Ruth Gregory, deputy chief UK economist from Capital Economics, said: “If the chancellor was hoping March’s figures would provide more scope for tax cuts at a fiscal event later this year, he will have been disappointed.
“Just based on the larger-than-expected 2023/24 budget deficit and the recent shift up in market interest rates, he may have even less fiscal ‘headroom’ (perhaps about £5bn) for tax cuts than the £8.9bn left over in March.”
Jessica Barnaby, the ONS’s deputy director for public sector finances, said: “Spending was up about £58bn, with increased spending on public services and benefits outstripping large reductions in interest payable and energy support scheme costs. But with public sector income up £66bn, overall, the deficit still fell.
“At the end of the financial year, debt remained close to the annual value of the output of the economy, at levels last seen in the early 1960s.”
A spokesperson for the Treasury said: “Debt increased in recent years because we rightly protected millions of jobs during COVID and paid half of people’s energy bills after Putin’s invasion of Ukraine sent bills skyrocketing.
“We can’t leave future generations to pick up the tab, so we must stick to the plan to get debt falling. And with inflation falling and wages rising – we have been able to cut national insurance by a third, which shows our determination to end the double taxation of work”.