Responses to public sector finance figures

Conservative response to public sector finances

Sir Mel Stride MP, Shadow Chancellor, said:

“Labour have borrowed £112.1 billion so far this year - the fifth highest borrowing on record. Record high taxes and irresponsible spending have weakened the economy.

“With youth unemployment now higher than in Europe, inflation above target and the economy stagnant, Wes Streeting is right: Labour have “no growth strategy”. Neither Labour nor Reform have the serious answers to stabilise the public finances.

“Only the Conservatives have a leader with a backbone, the plan and the team to get Britain working again.”

ENDS

Notes to Editors:

Labour have made irresponsible choices:

• Labour's hiked taxes by £26 billion – pushing the tax burden to a historic high. Despite her pledge not to ‘come back for more', Rachel Reeves increased taxes by £26 billion, pushing the tax burden to a historic high of 38.3 per cent of GDP (OBR, Economic and Fiscal Outlook, 26 November 2025, archived).

• Welfare spending will reach £406 billion by the end of the scorecard after Labour abandoned their welfare reforms. Labour's failure to reform welfare means welfare spending will reach £406 billion by the end of the scorecard (OBR, Economic and Fiscal Outlook, 26 November 2025, link). 

As a result, the economy is weaker:

• Economic growth has remained sluggish. After a year of sluggish growth, GDP growth was just 0.1 per cent in the three months to December, after a fall of 0.1 per cent in the three months to November (ONS, GDP monthly estimate, UK: December 2025, 12 February 2026, link).

• Inflation is above target. Having inherited inflation bang on the 2.0 per cent target, new figures show it rose by 3.0 per cent in the 12 months to January 2026, meaning inflation has exceeded the Bank of England's target every month since Labour's first Budget (ONS, Consumer Price Inflation, UK: January 2026, 18 February 2026, link).

• The unemployment rate is 5.1 per cent, its highest level since the pandemic. The unemployment rate for 16 and over reached 5.2 per cent in October to December 2025, up from 4.2 per cent at the election. Additionally, the November 2025 Economic and Fiscal Outlook raised the forecast unemployment rate for each year from 2026 through 2029 (ONS, Labour market overview, UK: February 2026, 17 February 2026, link).

Institute for Fiscal Studies

Responding to today's ONS figures on the public finances, Nick Ridpath, Research Economist at the Institute for Fiscal Studies, said:

“Today's data on the public finances is particularly important, given the outsized impact of January's self-assessment returns on revenues and borrowing for the year as a whole. Income tax receipts had been a little disappointing over 2025, lagging behind forecasts even as inflation and wage growth exceeded expectations. But today's data shows that self-assessment revenues in January were almost £2 billion (6%) higher than forecast. The government's plan to run a current budget surplus from 2028-29 onwards is reliant on marked reductions in borrowing over the next few years – reductions that will be far easier to achieve if tax revenues continue to come in strongly.” 

Today, the Office for National Statistics published new figures on government revenues, spending and borrowing:

• The government normally runs a surplus in January. In other words, it raises more than it spends. Today's figures show that the surplus in January was £30 billion. This is more than double the figure for the same month last year, and a £6 billion improvement on OBR's forecast from November. Much of the gap stems from significantly lower debt interest spending in January: the government spent £2.3 billion servicing its debt last month, around £4 billion below what was forecast by the OBR. 

• Government borrowing is expected to be lower this year than last, as the government takes further steps towards its target for current budget surplus by 2029-30. Cumulative borrowing over the first ten months of this year is £15 billion lower than last year, meaning that borrowing is coming down even faster than expected  

• Public finance data from January is particularly important, as it is when a large share of self-assessment income tax is paid. Income tax receipts have been disappointing up to this point in the financial year, lagging behind forecasts despite inflation and wage growth surpassing expectations. Today's data shows that for the second straight month, income tax receipts have surpassed the forecast produced only back in November. This may be a welcome sign that government receipts are starting to get the boost from inflation and wage growth earlier in the year.  

These figures will be revised and revised again, and so we should not place too much weight on figures from any single month. All the same, out-turn data does provide important insights into the state of the economy and public finances, and points to issues that could affect the Office for Budget Responsibility's forecast in a couple of weeks time. 

Figure 1. Cumulative monthly public sector net borrowing, outturns and OBR forecast