Calm before the storm

The Office for National Statistics (ONS) published the monthly public sector finances for April on Friday 22 Mayl 2026, reporting a provisional fiscal deficit for the first month of the 2026/27 financial year of £24.3bn, £4.9bn more than a year previously.

The ONS revised public sector net debt on 31 March 2026 up by £6bn from a previously reported £2,911bn to £2,917bn, while reducing the reported deficit for the year to 31 March 2026 by £3bn to £129bn, reducing the budget overrun for the last financial year from £14bn to £11bn.

Martin Wheatcroft, external advisor on public finances to ICAEW, said: “The provisional deficit for April 2026 was both overbudget and higher than in April a year ago, not the best of starts for the new financial year. While the Chancellor will have been pleased that the ONS revised the reported deficit for the last financial year down by £3bn, she will have been less happy about their £6bn upward revision in the net amount of debt owed on 31 March 2026.

“Her decision to limit the level of support she is providing to households and businesses affected by rising energy costs aims to minimise the cost to the taxpayer in contrast with the much more generous support packages seen during the pandemic and the cost-of-living crises.”

He continued: “With more spending on defence expected to be announced in the very near future, the Chancellor will be wondering just how far over budget she will need to go to keep  the show (or, in this case, the UK economy) on the road.”

Month of April 2026

The provisional shortfall of £24.3bn in the first month of the financial year comprised a current budget deficit of £17.4bn (£94.8bn receipts less £112.2bn current spending including deprecation) and public sector net investment of £6.9bn.

April’s deficit was £3.4bn more than budgeted with a £2.6bn negative variance on the current budget deficit and a £0.8bn overspend on net investment. It was £4.9bn higher than in April 2025, with a £3.5bn increase in the current budget deficit (£6.2bn from higher spending partially offset by £2.7bn from higher receipts) and a £1.4bn increase in net investment. 

Receipts of £94.8bn for the month were £7.8bn lower than the £102.6bn average for the previous 12 months, while current spending of £112.2bn was £5.4bn more than the £106.8bn monthly average over the same period. Net investment of £6.9bn was £0.1bn above the monthly average for last year of £6.8bn. 

The main driver of the increase in spending was welfare, which was up by 10% on a year ago. This partly down to higher benefit rates, including a 6.2% increase in the Universal Credit standard allowance and a 4.8% increase in the state pension, with much of the balance due to an increase in the number of claimants and pensioners.

Debt interest was also up compared with a year ago instead of the previously anticipated reduction due to lower interest rates and lower inflation. The risk is this trend will continue given that with interest rates are no longer expected to fall and inflation is now expected to rise.

Borrowing and debt 

Table 2 summarises how the government borrowed £26bn during April to take public-sector net debt to a provisional £2,943bn on 30 April 2026. The movement comprised public sector net borrowing (PSNB) of £24bn to fund the deficit plus £2bn borrowed to fund government lending and working capital requirements.

The ratio of public sector net debt to GDP increased by 0.5 percentage points from 93.7% of GDP at the start of the month to a provisional 94.2% on 30 April 2026. This is after 0.4 percentage points of ‘inflating away’ caused by inflation and economic growth adding to GDP (the denominator in the ratio).

Public sector gross debt on 30 April 2026 was £3,438bn. Deducting cash and other liquid financial assets of £495bn results in public sector net debt of £2,943bn.

Adding £733bn in other financial liabilities and deducting illiquid financial assets of £1,062bn results in public sector net financial liabilities (PSNFL or ‘persnuffle’) of £2,614bn. Deducting fixed and other non-financial assets of £1,887bn results in public sector negative net worth of £727bn.

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.

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

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