Public finances round out financial year with a small upside 

The Office for National Statistics (ONS) published the monthly public sector finances for March on Thursday 23 April 2026. They reported a deficit for the month of March of £13bn, bringing the provisional total for the 2025/26 financial year to £132bn.

This was £14bn more than budgeted, an improvement from the £21bn budget overrun reported last month, reflecting a £1bn budget underrun in March combined with £6bn in positive revisions to previous months.

Martin Wheatcroft, external advisor on public finances to ICAEW, said: “The Chancellor will have been pleased that the provisional numbers for the final month of the 2025/26 financial year were broadly in line with budget, with lower inflation and revisions to previous months helping reduce the cumulative budget overrun from £21bn last month to £14bn in March.

“Her focus is now on the new financial year, where the cost implications of the conflict between the US and Iran are rising daily with the final total still unknown.”

He continued: “The challenge for the government is that spending pressures continue to mount, ranging from an urgent need to invest in the defence of the nation to the political pressure it is under to address the cost of student loans. This puts the Chancellor’s medium-term fiscal strategy of gradually reducing the deficit by constraining the rise in public spending at significant risk.”

Month of March 2026

The provisional shortfall of £13bn in the month comprised a current budget surplus of £6bn (receipts of £112bn less current spending of £106bn) less net investment of £19bn. 

This was £1bn better than budget with a £1bn positive variance on the current budget surplus and net investment in line with budget. This was driven by a reduction in interest expense on index-linked debt as a consequence of lower inflation.

The deficit for the month was £1bn lower than in March last year, with a £3bn improvement in the current budget surplus (£6bn from higher receipts offset by £3bn from higher current spending) offset by £2bn in higher net investment.  

Receipts of £112bn for the month were £10bn higher than the £102bn average for the previous 11 months, while current spending of £106bn was £1bn less than the £107bn monthly average.  

As expected, net investment in March of £19bn was significantly higher than the £6bn monthly average for the first 11 months of the financial year, driven by the traditional end-of-year capital expenditure rush. 

Borrowing to finance the deficit of £13bn, combined with a £16bn cash outflow from working capital and lending activities, resulting in an increase in public sector net debt of £29bn from £2,882bn on 28 February to £2,911bn on 31 March 2026. 

12 months to March 2026 

The provisional deficit for the financial year of £132bn comprises a cumulative current budget deficit of £51bn (receipts of £1,231bn less current spending of £1,282bn) and net investment of £81bn. 

This is a £20bn improvement over the 2024/25 cumulative deficit of £152bn and is £1bn below the Office for Budget Responsibility’s Spring Forecast estimate. However, it was £14bn overbudget with the £1bn positive variance in the month of March combining with a net £6bn revision to prior months to reduce the year-to-date budget overrun from £21bn last month. 

The budget overrun of £14bn for the 12 months can be analysed as an overrun of £15bn on the current budget deficit less an underspend of £1bn on net investment. 

Table 1 highlights how full year receipts of £1,231bn were 8% higher than last year, cumulative current spending of £1,282bn was 6% higher, and net investment of £81bn was 7% higher.

• Income tax receipts (including self-assessment) were up 8% from a combination of inflation and fiscal drag from frozen tax allowances.
• National insurance receipts were up 19%, reflecting the increase in employer national insurance from the start of the financial year.
• VAT receipts were up 4%, slightly ahead of consumer price inflation.

The 6% increase in current spending to £1,282bn in the year has principally been driven by public sector pay rises, higher supplier costs, and the uprating of welfare benefits. 

Current spending includes debt interest of £131bn that is £5bn higher than in 2024/25. This is primarily a consequence of a £3bn increase in indexation on inflation-linked debt, with interest on variable and fixed-interest debt up by just £2bn as lower interest rates during the year offset most of the effects of a higher level of debt.

Net investment of £81bn in the 12 months to March was £5bn more than in the same period last year. This comprised capital expenditure of £117bn (up by £8bn from the same period a year ago) and capital transfers (capital grants, research and development funding, student loan write-offs) of £36bn (in line with last year) less depreciation of £72bn (up £3bn). 

Borrowing and debt 

Table 2 summarises how the government borrowed £106bn during the financial year to take public-sector net debt to a provisional £2,911bn on 31 March 2026.  

The movement comprised public sector net borrowing (PSNB) of £132bn to fund the deficit less a £26bn net cash inflow from working capital movements and government lending. 

The ratio of public sector net debt to GDP increased by 0.6 percentage points from 93.2% of GDP at the start of the financial year to a provisional 93.8% on 31 March 2026. This is after 2.9 percentage points of ‘inflating away’ caused by inflation and economic growth adding to GDP (the denominator in the ratio). 

Public sector net debt on 31 March 2026 of £2,911bn comprised gross debt of £3,422bn less cash and other liquid financial assets of £511bn.  

Public sector net financial liabilities were £2,582bn, being public sector net debt plus other financial liabilities of £733bn less illiquid financial assets of £1,062bn.  

Reported public sector negative net worth was £696bn, being net financial liabilities less non-financial assets of £1,886bn, although this is understated as it excludes more than one trillion pounds in unfunded employee pension obligations. 

Revisions 

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

This month the ONS revised the reported deficit for the 11 months to 28 February 2026 down by £6bn to £119bn while revising public sector net debt on that date upwards by £2bn to £2,882bn. 

• For further information, read the public sector finances release for March 2026.