This is the most important chart for understanding how working-age benefit spending has changed over last two decades. In overall levels spending as % of GDP is lower now that it was in 2012, but the composition of that spending is very different.

Eduin Latimer@eduinlatimer.bsky.social · 4w ago

3. Rising spending on disability benefits and other health-related benefit spending have pushed up overall spending on benefits for working-age adults and children since the pandemic but as a share of GDP total benefit spending is still lower than it was in 2012.

Great piece from Max. One noteworthy point on both the VAT cut and today’s bus fare cap is both costs are mostly being covered by cuts to capital spending. There’s a pattern emerging of increasing shifts towards day-to-day spending (and tax cuts) as a focus

Max Warner@maxwarner.bsky.social · 2w ago

We have a comment in the Times today on how yesterday's VAT cut will be paid for. The money has to come from somewhere within departmental budgets, but we don't know what will be squeezed. That's different to the bus fares policy, where more specific cuts have been set out

There'll be lots of discussion of effect of inflation on households today. But today's ONS figures are a reminder that impact of inflation on broader public finances are also something Andy Burnham and John Healey will have to think about:

The Institute for Fiscal Studies@theifs.bsky.social · 2w ago

Today’s public finance figures show debt interest spending was £33 billion in the first quarter of the 2026–27 financial year, equivalent to 4.3% of GDP. Debt interest spending is set to remain high, leaving the new PM and Chancellor in a tight fiscal situation going forward:

On the Defence Investment Plan top-ups: the political turmoil surrounding top-ups averaging <£4bn/year feels like a small taste of what's in store over the next decade if we want to hit the 3.5% NATO commitment - which would require (much!) more defence money

Max Warner@maxwarner.bsky.social · last mo.

3. Zooming out, we've still got a long way to go if the govt still wants to get to 3.5% of GDP by 2035 - current plans only get us about a third of the way there relative to 23-24. Getting to 3.5% could cost an additional £25bn each year in today's terms relative to these plans

Could the government borrow more to fund investment in infrastructure? There's a case for borrowing for productive investment, but there isn't one simple trick to substantially increase borrowing within the current fiscal rules. A short thread:

Really important context from Max below: the funding gap the government might need to fill for the Defence Investment Plan is far, far below the amount that would eventually be needed to reach 3.5% of GDP on defence spending

Max Warner@maxwarner.bsky.social · 2mo ago

Lots of discussion in recent weeks about how to fund the (much-delayed!) Defence Investment Plan. While this is important, it is only the first step in the longer-term and much larger defence spending increase this government has committed to. A short thread:

This is most striking figure from Millburn Review. They estimate that around half of the 18-24 population who are not in education, employment or training (NEET) are not claiming any benefits. This limits how effective any reforms to the benefit system can be in reducing the NEET rate.

It wasn’t the biggest story yesterday, but the NHS in England hit its intermediate target that 65% of patients should be waiting 18 weeks or less for elective care by Mar26. That’s after big recent improvements from 61.5% in Jan to 65.3% in March. So how was this achieved?🧵

Pretty good news on growth in the first quarter of the year today, but worth not over-interpreting. In each of the last four years, we've seen higher growth in Q1 than later in the year - you'd want to see good news later in the year to think this is a sign of a genuine improvement.

Lot of discussion of possible tweaks to the fiscal rules. Worth noting a 10 year rule would make it even easier for a Chancellor to meet the rule just by promising cuts well into future parliaments. And that makes it very hard for the rule to constrain borrowing in the short term.

The House of Lords Economic Affairs committee has just published a report on the fiscal framework. One fairly major suggestion: that the government set out an additional fiscal target, in which debt as a share of GDP is lower in the third year of the forecast than in the first year in normal times

Fortifying the fiscal framework report published - Committees - UK Parliament

The House of Lords Economic Affairs Committee has today published its report, &lsquo;Fortifying the fiscal framework&rsquo;.

committees.parliament.uk

Key context to talk about the cost of any potential energy support package: an energy price shock is already bad news in itself for the public finances. Higher inflation and interest rates would push up debt interest spending, welfare spending, and put pressure on public services.

The Institute for Fiscal Studies@theifs.bsky.social · 5mo ago

New: War in the Middle East has pushed up energy prices, which if sustained, could put pressure on households and the public finances. How might the government choose to respond? 📈 @peterlevell.bsky.social, @nickridpath.bsky.social and Bobbie Upton’s new briefing explores the options:

🚨 OUT NOW 🚨 What did we learn from the Spring Statement? 📈 Labour MP @lukemurphy.bsky.social, Resolution Foundation's @jamessmithrf.bsky.social and the IFS's @nickridpath.bsky.social join @alaintolhurst.bsky.social to discuss the state of the economy 🎧 Listen now: pod.fo/e/39ea85

(Sidenote: this is an average - worth noting how weird the profile looks. Growth much slower in 2029-30, perhaps coincidentally the year the fiscal rules currently bind, before speeding up again thereafter...)

There's lots of uncertainty about unemployment rise - OBR has consistently forecast it to come down quickly, but Bank of England suggest higher unemployment could be sustained for a few years. This is v important for the public finances - sustained higher unemployment could hit borrowing hard.

This is a really key point from Ben. The recent debate has focused so much on how the govt can make the numbers add up to get a forecast current budget surplus. But a forecast budget surplus is not the same as actually running a budget surplus - delivering this will be the real challenge.

Ben Zaranko@benzaranko.bsky.social · 5mo ago

The government plans to reduce government borrowing by 2.5% of GDP over the next four years – a sizeable fiscal consolidation. The question is now one of delivery. And past experience clearly shows that promising lower borrowing is easier than delivering lower borrowing.

The Spring Forecast had a higher revenue forecast, driven mainly by higher equity prices (up 8% between forecasts) adding £9bn extra receipts in 2030/31. This is good news - but equities move regularly: given global volatility, there’s a risk higher forecast could be temporary.

The OBR has revised its annual net migration forecast down by 50-100k, with a small negative impact on forecast tax revenues. If new ONS data for this year shows lower immigration, the OBR could further reduce their net migration assumption, with larger effects on tax revenues.

The OBR’s current budget forecast has barely changed, with borrowing still set to fall over the next few years. Past governments have often set out plans for a current budget surplus, but it’s very rare that they’ve achieved it. That will be the key challenge going forward.

We're expecting a quiet Spring Forecast, without major policy changes or forecast revisions. But there are still things to keep an eye on. One important one is the migration forecast, where recent data highlights potential risks to the forecast in future. A quick thread:

The Institute for Fiscal Studies@theifs.bsky.social · 5mo ago

NEW: Next week’s Spring Forecast is unlikely to contain any big policy surprises, but will set the scene for a potentially consequential Budget this autumn. 📗Read @benzaranko.bsky.social and @nickridpath.bsky.social's new briefing on what to look out for next week: ifs.org.uk/articles/loo...

Today’s public finance figures show borrowing is falling, and falling even faster than forecast back in November. This is important: the Chancellor’s plan for meeting her fiscal rules is predicated on borrowing falling significantly this year and next.

Here it is, my magnum opus: an analysis of what’s wrong with the UK’s approach to fiscal policy (under this and previous governments), and a proposal for what an alternative to pass-fail fiscal rules could look like. I’ll follow up with a longer thread later.

The Institute for Fiscal Studies@theifs.bsky.social · 6mo ago

NEW: The UK’s approach to fiscal policy needs a rethink. 📗 Instead of pass–fail fiscal rules and the consequent fixation on ‘fiscal headroom’, @benzaranko.bsky.social’s new report argues that the UK would be better served by a new framework, based around a set of ‘fiscal traffic lights’:

There is an increasing sense that the UK's approach towards fiscal policymaking, and in particular the excessive focus on "headroom", isn't delivering good outcomes. Come along on 19 February to hear me make the case for how we could do things differently, and to hear from our terrific panel.

New ONS public finance figures for December show borrowing from April to December was below 2024, in line with forecasts. This is good news, but under the hood there's little sign of a pickup in revenues from inflation - an important thing to watch out for going forward. (1/4)

New ONS public finance data today shows central government revenues are still lagging significantly below March expectations. Given inflation has been higher than forecast, this is surprising - even VAT receipts, which one might expect to rise with inflation, are below forecast

Key thing about the OBR's downgrade then upgrade to revenues: much of it is from inflation and wage growth this year boosting tax take. While inflation and wage growth are up, we're yet to see any increase in tax revenue in recent public finance data. The government will hope it materialises soon.

The Institute for Fiscal Studies@theifs.bsky.social · 8mo ago

The OBR has downgraded its medium-term productivity forecast, but higher inflation and wage growth have more than offset the impact on receipts. This is a key reason the fiscal repair job is much smaller than expected.

Underrated part of yesterday's Budget was what's happening to public service spending in 2028-29. Spending Review settlements reopened just 5 months after the SR to account for loosely-specified 'efficiency savings' of £1.4bn in 28-29 (rising to 4bn in 29-30)

Some early takeaways on the public finances from us @theifs.bsky.social. Really interesting thing to me is that the much-anticipated productivity downgrade didn't end up creating that big an increase in forecast borrowing. This means the policies we've seen today have grown headroom substantially.

The Institute for Fiscal Studies@theifs.bsky.social · 8mo ago

📈The OBR downgraded their productivity forecast, but higher inflation and wage growth meant higher forecast receipts overall. However, additional spending pressures meant a £6bn hit to headroom in 2029-30 in the pre-measures forecast. #Budget2025 public finances THREAD: [1/4]

One reading of this remark is that the fiscal rule requiring debt to be falling as a share of GDP in 2029/30 is now the one that binds (as cuts to capital spending wouldn't help to meet her borrowing rule). That's entirely possible - and was what we predicted in the IFS Green Budget, as it happens.

Jim Pickard@pickardje.bsky.social · 9mo ago

Rachel Reeves lets the cat out of the (already threadbare) bag about the looming break to the manifesto: “It would of course be possible to stick with the manifesto commitments but that would require things like deep cuts in capital spending.” www.ft.com/content/a502...

If there's one key message for the Chancellor from our analysis published today, it's this: Doing a bigger package to increase ‘headroom’ wouldn’t be costless – but nor is limping from one forecast to the next under constant speculation that policy will be tightened again.

The Institute for Fiscal Studies@theifs.bsky.social · 10mo ago

NEW: The Chancellor almost certainly has a fiscal repair job on her hands at next month’s Budget. But doing the bare minimum risks another fiscal groundhog day next year. 🧵 THREAD on our new IFS Green Budget's findings on the UK's economic outlook and fiscal situation: