What did the Office for Budget Responsibility say about fiscal forecasts in 2024–25?
Executive summary
The OBR’s public forecasts for 2024–25 show borrowing remained elevated—around £150bn or roughly 5% of GDP in 2024–25—and receipts for 2024–25 were revised down versus prior forecasts (an in‑year shortfall highlighted as about £7.6bn against an October baseline), while taxes as a share of GDP are projected at about 35% in 2024–25 before rising later in the decade (to just over 38% by 2029–30) [1] [2] [3].
1. What the OBR actually said about 2024–25: headline numbers
The OBR’s Economic and Fiscal Outlooks present 2024–25 as a year of high borrowing and elevated debt interest costs: public sector net borrowing in 2024–25 was reported around £150 billion (about 5% of GDP) and debt interest spending for 2024–25 was highlighted as large relative to other areas of spending [1] [4]. The OBR also documented an in‑year shortfall in receipts for 2024–25 compared with its October forecast, noting receipts were expected to be about £7.6 billion lower in 2024–25 [2].
2. Why receipts and borrowing moved: the OBR’s explanation
The OBR attributed the weaker‑than‑expected receipts in 2024–25 primarily to weaker self‑assessment and onshore corporation tax payments, and to higher interest costs and inflation that raise debt interest spending later in the forecast [2]. Separately, their March and subsequent updates note higher Bank Rate, gilt yields and RPI inflation as drivers that push up debt interest costs over the forecast horizon [2].
3. Medium‑term framing: taxes, spending and the fiscal rule test
While 2024–25 shows elevated borrowing, the OBR’s forecasts project a rise in National Accounts tax receipts as a share of GDP from around 35% in 2024–25 to an all‑time high of just over 38% from 2029–30 onward — a structural shift that helps explain why borrowing is forecast to trend down later in the decade [3]. The OBR uses these multi‑year projections to judge the government’s fiscal mandate (the requirement for the current budget to be in surplus in 2029–30), and flags that headroom against those rules has been eroded by higher interest costs and lower receipts [5] [2].
4. What changed versus earlier forecasts and why it matters
Compared with the OBR’s October forecast and earlier March updates, the OBR says borrowing for 2024–25 was higher and receipts weaker — the March update noted receipts in 2024–25 were about £7.6bn below the October forecast and that borrowing was correspondingly higher in the near term [2]. The Institute for Government and market commentators warned this leaves fiscal headroom “wafer‑thin,” meaning smaller shocks could push the government off its planned path [6].
5. Political and methodological context the OBR emphasizes
The OBR’s role is to assess fiscal sustainability and judge government performance against fiscal targets; it publishes two EFOs a year and supplementary data and methodological annexes to explain revisions and assumptions [5] [7]. The OBR has also noted that changes in migration, productivity and tax take assumptions — and revisions in national accounts data — materially affect the 2024–25 picture and the medium‑term path [8] [9].
6. Limits and uncertainties the OBR flags
The OBR highlights several sources of uncertainty: interest rate and gilt‑yield paths, the timing and size of tax payments (notably self‑assessment and corporation tax), and the economy’s productivity and inflation trajectory. The OBR explicitly shows that higher rates and inflation raise debt interest costs substantially across the forecast [2] [8]. Forecasts are conditional and the OBR’s own evaluation work shows its central projections can differ materially from outturns [10].
7. Competing interpretations and what to watch next
Market commentators interpret the OBR’s 2024–25 revisions as evidence of thin fiscal buffers and heightened risk to policy ambitions if growth or receipts disappoint [6]. The OBR’s projection that taxes will rise to record shares of GDP by 2029–30 (from ~35% in 2024–25 to >38%) is a central plank of its path back to lower borrowing — but that outcome depends on sustained economic performance and tax receipts behaving as assumed [3].
Limitations: this summary draws only on the OBR reports and related brief commentary in the supplied sources; available sources do not mention any later outturn data or independent audits beyond those cited here [2] [3] [1].