Responding to the figures Isabel Stockton, IFS Senior Research Economist, said:
“Today’s figures suggest that day-to-day spending by central government on goods and services between April and July was £140 billion, up by 5% on the same months in 2023. It is also some £6 billion above that forecast for those months in the March Budget. In just four months – or one-third – of this financial year the Government appears to have spent 34.1% of what was budgeted for the whole year, whereas since comparable data began in 1997 it has never spent more than 32.9% of the eventual total in the first third of the financial year. This is indicative of the scale of the pressures on departmental budgets – in some cases well and above what was budgeted for.
Tax revenues – despite economic growth in the first quarter of the financial year surpassing some of the more pessimistic expectations – are running close to forecast or, if anything, slightly behind. This, combined with higher spending, leaves borrowing higher than forecast. In the first four months of the financial year borrowing was £51 billion, essentially the same as that borrowed in the same months last year, but £5 billion higher than what was forecast to be borrowed in those months in the March Budget. All of these data are preliminary and we should be cautious of over-interpreting them. But the early signs are that better-than-expected growth figures won’t be enough save Rachel Reeves from tough choices in her first Budget on 30 October. The combination of in-year spending pressures identified at last month’s spending audit and the ongoing, and well known, pressures facing many public services suggest that the accompanying spending review for 2025-26 could be a particularly difficult exercise.”