- Borrowing overshoots OBR forecast by £6.6 billion to come in at £120.7 billion for the year ending March 2024
- Tax receipts up 7.5%, or £52.6 billion, compared to previous year
- Debt interest payments fell by £29.3 billion but benefit payments rose by £36.9 billion
Danni Hewson, head of financial analysis at AJ Bell, comments on the latest public sector finance figures:
“On the face of it the latest public sector finances don’t appear to give the current chancellor the sort of cushion he needs to deliver a voter pleasing pre-election tax cut. Borrowing last year overshot forecasts as benefit payments were boosted and wages were also increased to help public sector workers deal with cost-of-living pressures.
“But as the inflationary backdrop pushed many employers to dole out chunky pay rises while tax thresholds were held steady, our old friend fiscal drag helped boost government coffers with income tax payments up a sizable £24.6 billion over the year. Government income was given an additional boost by that hike to corporation tax and price rises forcing up VAT levels.
“All told, public sector receipts came in at £66 billion – a sum which helped offset all those extra demands on the public purse.
“Interest payments on the whopping £2.7 trillion debt pile also fell as inflation cooled. But debt as a percentage of GDP is still nestling at an uncomfortable 98.3% and the impact of the second round of National Insurance cuts has yet to be felt.
“The healthy tax take is an indication that the economy has been incredibly resilient, even in the midst of a recession. But public sector services are creaking and looking at these numbers there seems little room for manoeuvre, especially if whoever sits behind the desk at number 11 wants to create some insulation against another big crisis like the pandemic.
“All of that doesn’t necessarily mean tax cuts are less likely, it just means that what comes next is likely to hurt more.”
