A leading think tank has warned that the Treasury is on course to overshoot public borrowing forecasts by £63bn compared to estimates made before Labour came to power as Chancellor Rachel Reeves prepares to unveil spending cuts next week.
According to new data from the Office for National Statistics (ONS), public sector net borrowing (excluding banks) for the first 11 months of the financial year has already exceeded the Office for Budget Responsibility’s (OBR) projections by more than £20.4bn. So far, borrowing has reached £132.2bn, compared to the OBR’s October Budget forecast of £111.8bn.
The Institute for Fiscal Studies (IFS) now estimates borrowing for the full financial year could hit £151bn—£23bn above the OBR’s October forecast and £63bn higher than projections made a year ago, before Labour’s general election victory.
IFS economist Isabel Stockton commented: “Today’s figures on government spending, borrowing, and revenue highlight the tough choices facing the Chancellor ahead of the Spring Statement. While upcoming forecasts will factor in cuts and stricter eligibility for health-related benefits, the actual impact will largely depend on how individuals respond to these changes.”
She added that the Chancellor faces limited options: “Boxed in by commitments to meet fiscal rules, avoid tax hikes, and steer clear of austerity for public services, there are few easy or risk-free choices left.”
Rachel Reeves is expected to announce a new wave of spending cuts in Parliament on Wednesday, attributing a downgraded growth outlook partly to the economic impact of Donald Trump’s ongoing tariff war.
It was also revealed on Thursday that Reeves has instructed government departments to provide real-time updates on public spending as part of her efforts to restore fiscal discipline.
In February alone, the Treasury borrowed £10.7bn, while the previously reported surplus for January was revised down to £13.3bn.
