Perilous state of public finances highlights challenge facing Chancellor ahead of her Spring Statement

22nd March 2025

The government borrowed £10.7 billion in February, significantly above the Office for Budget Responsibility forecast of £6.5 billion, highlighting the perilous state of the public finances confronting the Chancellor ahead of her Spring Statement, the Resolution Foundation said.

The latest ONS data shows that the UK's weak economic performance is showing up in the public finances - with central government tax receipts now £11.4 billion below the OBR forecast 11 months into the financial year, and overall borrowing £20.4 billion higher than forecast.

The Foundation says that this weak performance is likely to continue you into next year – with GDP growth for 2025 downgraded significantly – and higher debt servicing costs likely to turn the Chancellor’s £10 billion current budget headroom in 2029-30 into a deficit that will need to be addressed to meet the fiscal rules.

James Smith, Research Director at the Resolution Foundation, said, "While the latest public sector finances data won’t have too much sway over the OBR’s updated economic outlook next week, they do highlight the perilous state of the public finances, which Rachel Reeves will need to address to meet her fiscal rules.

"The Chancellor is reportedly ruling out tax rises to meet these rules and is set to cut spending on benefits and public services instead. But if the economy doesn’t turn a corner soon tax rises will need to come back into play."