The UK government borrowed £132bn in the financial year ending March, £700m below the Office for Budget Responsibility's forecast of £132.7bn, according to the Office for National Statistics. This is the lowest borrowing in three years and £19.8bn less than the previous year, though still the sixth highest on record.
Chancellor Rachel Reeves, who took office in July 2024, has implemented fiscal rules requiring day-to-day spending to be funded by taxes by 2030. Her headroom to meet this target stood at £23.6bn in February, up from £21.7bn in November. However, the Iran war is expected to erode this buffer through higher inflation, interest rates, and potential job cuts.
March borrowing was £12.6bn, down £1.4bn year-on-year and the lowest since March 2022, though above economist expectations of £10.3bn. The annual figure benefited from revised ONS data, higher tax receipts, and lower debt interest payments. Tax receipts rose £54.7bn to £845.4bn, driven by national insurance and capital gains tax changes.
Chief Secretary to the Treasury James Murray said the deficit reduction reflects the government's plan to cut borrowing. However, economists warn the improvement may be short-lived. Ruth Gregory of Capital Economics forecasts borrowing could overshoot by £29bn in 2026-27 due to the energy price shock from the Middle East conflict.
