OBR Admits £60bn Borrowing Underestimate but 2025-26 Outturn Beats Forecast

The Office for Budget Responsibility published its latest evaluation report on Tuesday, admitting it underestimated government borrowing by around £60 billion across successive forecasts. In March 2023 the watchdog projected borrowing for the 2024/25 financial year at £85 billion. In March 2024 it raised that figure to £87 billion.

Actual borrowing reached approximately £151 billion, leaving gaps of £66 billion and £65 billion respectively. The watchdog conceded it had been overly optimistic about the economic impact of the £25 billion increase to employer national insurance contributions.

It stated that persistently high inflation and elevated interest rates increased debt interest payments and welfare spending beyond expectations.

The global energy price shock following Russia’s invasion of Ukraine in 2022 also proved more severe than originally anticipated. Rachel Reeves’s first budget in October 2024 included around £70 billion in additional day-to-day spending and public investment. The Office for Budget Responsibility acknowledged its forecasts for economic growth had also been too optimistic.

4 per cent in 2025 compared with the 2 per cent growth rate previously forecast. " Private sector economists generally proved more accurate than the Office for Budget Responsibility in forecasting economic growth, although both groups underestimated borrowing levels. 2 per cent, its highest level in more than a decade.

Economists have increasingly linked rising unemployment to the Chancellor’s national insurance rise. The Office for Budget Responsibility suggested the impact of the employer national insurance increase on economic activity had been greater than initially expected when the policy was announced nearly two years ago.