The monthly public sector finance release for March 2025 published by the Office for National Statistics (ONS) on Wednesday 23 April 2025 reported a provisional deficit of £16.4bn for the month of March, increasing the cumulative deficit for the 12 months to March 2025 to £152bn.

Alison Ring OBE FCA CPFA, ICAEW Director of Public Sector and Taxation, says: “After another year with little growth, public sector net debt now stands at £2,814bn – equivalent to approximately £95,300 per household in the UK. This is £3,500 per household more than a year ago, and well on its way to reach £100,000 per household within the next couple of years.

“Today’s numbers show that the reality is much worse than the £22bn ‘black hole’ in the 2024/25 budget identified by the incoming government last summer, with higher debt interest and weaker tax receipts adding to the Chancellor’s financial headaches. The provisional deficit for the year ended 31 March 2025 reported by the ONS yesterday of £152bn was £78bn or more than twice the £74bn originally budgeted by the previous government just over a year ago. 

“The Chancellor will be relieved that the 2024/25 financial year is now firmly behind her. In theory, the large tax rises coming into force this month should help refill the public purse to pay for the government’s missions to grow the economy and reform and improve public services. Unfortunately, the public finances remain vulnerable to the economic headwinds caused by those tax rises that, together with a global trade war, are likely to put significant pressure on the Chancellor as she seeks to stick to her fiscal rules in the current financial year.”

Month of March 2025

The £16.4bn deficit for the month of March 2025 was £2.8bn more than the same month a year previously and £3.4bn more than the budget set in March last year.

Gross capital investment in March 2025 was £22.1bn, almost twice the monthly average of £11.3bn incurred in the eleven months to February 2025. This end-of-year ‘capital rush’ follows the historical pattern that sees departments spend as much as possible of their capital budgets by the end of the financial year.

Financial year to date

The cumulative shortfall between receipts and spending of £152bn for the 12 months ended 31 March 2025 was £21bn higher than last year, £15bn more than the Office for Budget Responsibility’s (OBR) revised estimate at the time of the Spring Statement 2025, £25bn more than the OBR’s mid-year estimate at the time of the Autumn Budget 2024, and £78bn more than the £74bn originally budgeted last March in the Spring Budget 2024. 

Cumulative taxes and other receipts between April 2024 and March 2025 amounted to £1,134bn, up 3% compared with 2023/24. This is illustrated by Table 1, which highlights how cuts in employee national insurance rates enacted by the previous government have been offset by higher income tax and corporation tax receipts. The increase in employer national insurance announced in the Autumn Budget 2024 took effect in April 2025 and so doesn’t feature in these numbers.

Table 1 also highlights how total current spending of £1,209bn for 2024/25 was up by 4% compared with April 2023 to March 2024, despite the end of energy support subsidies that inflated last year’s cost base, and a reduction in payments to the EU. There was a 5% increase in spending on public services and 7% on welfare spending, partially offset by an 8% reduction in subsidies and 2% in lower debt interest.

The fall in debt interest of £3bn compared with last year was driven by a £9bn swing in indexation on inflation-linked debt as inflation slowed, offsetting a £6bn increase in the interest payable on variable and fixed-rate debt.

The current deficit for the 12 months to March 2025 was £75bn, 21% more than in 2023/24.

Net investment of £77bn comprised £109bn in capital expenditure (up 6% from the same period last year) and £37bn in capital grants, student loan write-offs and other items (up 19%) less £69bn in depreciation (up 6%).

Borrowing and debt

Table 2 summarises how the government borrowed £128bn during 2024/25, comprising public sector net borrowing (PSNB) of £152bn to fund the deficit less £24bn in net cash inflows from government lending activities and working capital movements.

The consequence was an increase in public sector net debt to £2,814bn on 31 March 2025, 5% more than the £2,686bn at the start of the financial year, and £998bn or 55% more than the £1,816bn on 31 March 2020 at the start of the pandemic.

Table 2 also illustrates how despite borrowing to fund the deficit being equivalent to 5.3% of GDP for the period from April 2024 to March 2025, the net debt to GDP ratio was only 0.2 percentage points higher than the 95.6% of GDP reported for the start of the financial year. Partly this was because of cash inflows from working capital movements and lending activities equivalent to 0.8% of GDP but mainly relates to a 4.3 percentage point reduction from the ‘inflating away’ effect of inflation and economic growth increasing GDP, the denominator in the net debt to GDP ratio.

Public sector net debt on 31 March 2025 of £2,814bn comprised gross debt of £3,198bn less cash and other liquid financial assets of £384bn. 

Public sector net financial liabilities were £2,452bn, comprising net debt of £2,814bn plus other financial liabilities of £707bn less illiquid financial assets of £1,069bn. 

Public sector negative net worth was £851bn, being net financial liabilities of £2,452bn less non-financial assets of £1,601bn.

Revisions and other matters

Caution is needed with respect to the numbers published by the ONS, which are expected to be repeatedly revised as estimates are refined and gaps in the underlying data are filled. This includes local government, where the numbers are only updated in arrears and are based on budget or high-level estimates in the absence of monthly data collection.

The latest release saw the ONS revise the reported deficit for the first 11 months of the financial year up by £3bn from £132bn to £135bn, and revise reported net debt at the end of February 2025 up by £5bn from £2,796bn to £2,801bn.

For further information, read the public sector finances release for March 2025.