Government borrowing is not forecast to increase year on year

On BBC Breakfast [1:19:25] this morning, Labour’s shadow chancellor Rachel Reeves MP claimed that “government borrowing is going up under the numbers published yesterday in every year of the forecast”.

Ms Reeves was challenged on this point by the BBC presenter she was speaking to, but she repeated the claim, saying: “No, borrowing goes up… borrowing goes up in every year of the forecast under the plans published yesterday.”

This is potentially confusing, and doesn’t fully explain what the figures show. The Office for Budget Responsibility’s (OBR) latest economic and fiscal outlook, published following yesterday’s Budget, forecasts that government borrowing will decrease year on year in every year of the forecast period, covering the next five financial years. However, the government is now expected to borrow more than was previously forecast in November.

What does the OBR borrowing forecast show?

Government borrowing refers to public sector net borrowing—the difference between what the government spends and what it receives in taxes over a particular time period. It’s also often known as the ‘deficit’.

According to the OBR, public sector net borrowing in the current financial year (2023/24) is estimated to be £114.1 billion. Over the next five years, it is forecast to fall every year, reaching £39.4 billion in 2028/29.

However, Ms Reeves may have been referring to the fact that the OBR borrowing figures published yesterday are higher than those in its November 2023 forecast (with the exception of the current financial year). That means the government is expected to borrow more than it was previously forecast to, but it’s worth being clear that this isn’t the same as saying that government borrowing is actually “going up” year on year.

Borrowing can also be expressed as a percentage of GDP—a measure which provides an estimate for the affordability of borrowing. Borrowing as a percentage of GDP is projected to decrease from 4.2% in the current financial year to 1.2% in 2028/29 (in line with the government’s fiscal target for borrowing to be no more than 3% of GDP by the fifth year of the forecast).

The OBR’s latest forecast increases its estimate of borrowing as a percentage of GDP in the first and last years of the forecast by 0.1 percentage points for each year, but estimates for the intermediate years remain unchanged compared to November 2023.

We’ve contacted Ms Reeves and the Labour party for comment and will update this fact check if we receive a response. 

Claims about economic forecasts made without appropriate context and caveats can damage public trust in both official information and politicians. MPs should use forecast data transparently and with all relevant context and caveats when a claim is first made, and quickly rectify oversights when they occur.

Image courtesy of Keir Starmer