What is UK budget deficit for Year 2024-25?

Introduction

The UK budget deficit, also known as public sector net borrowing, occurs when the government spends more than it receives in tax and other revenues. Key points about the UK’s current budget deficit include:

Recent Figures

In the 2023/24 financial year, the UK’s budget deficit was £121 billion, equivalent to 4.4% of GDP.

This represents the 18th largest deficit since 1948 as a percentage of GDP.

For 2024/25, the Office for Budget Responsibility (OBR) forecasts a deficit of £127.5 billion or 4.5% of national income.

Components and Types

The deficit consists of two main components: the current budget deficit and net investment.

The current budget deficit, which represents borrowing for day-to-day public sector activities, was £51 billion in 2023/24, or 1.9% of GDP.

Public sector net investment accounts for the remainder of the total deficit.

Trends and Projections

The deficit has decreased significantly from its peak of £314.3 billion (15% of GDP) in 2020/21, which was largely due to COVID-19 related spending.

The OBR expects the deficit to fall over the next five years, reaching £70.6 billion by 2029-30.

However, the UK is likely to continue experiencing fiscal deficits averaging around 6% of GDP in the coming years.

Fiscal Rules and Targets

The current government has set fiscal rules, including a target to have the current budget in balance or surplus by 2029/30.

Managing the fiscal imbalance and stabilizing debt levels while fostering economic growth remains a key challenge for the government.

Factors Affecting the Deficit

Economic growth, tax revenues, government spending, and debt interest payments all influence the size of the deficit.

In 2023/24, government debt interest spending was £102 billion, equivalent to 3.8% of GDP.

The structural deficit, which is not related to the economic cycle, is an important consideration but difficult to measure precisely.

Conclusion

The UK’s budget deficit remains a significant economic challenge, requiring careful management to balance fiscal responsibility with investments for future growth.

£314 billion deficit in 2020/21 and now at £127 billion shows progress but pushes a reader to think of a bankrupt economy or large government spending?

Estimating to bring the budget deficit down, with no concrete plans, £127 billion to £70.6 billion seems far fetched.

Fitch Ratings recently upgraded the UK’s credit rating outlook from “negative” to “stable” while maintaining its AA- rating. Not sure how you can call £127 billion stable?

What about military aid for two wars Ukraine and Israel?

Is Starmer government and the public opinion in favor of this aid given the country itself is in dire economic state?

Aid to Ukraine

The UK has committed a total of £12.8 billion in aid to Ukraine, which includes:

£7.8 billion in military support

£5 billion in non-military support

Aid to Israel

The search results do not provide a specific total amount of UK aid to Israel. However, they do mention that:

Since 2008, the UK has licensed arms worth over £574 million to Israel

In 2022, UK exports to Israel amounted to £42 million

Total trade in goods and services (exports plus imports) between the UK and Israel was £5.6 billion in the four quarters

To the end of Q2 2024, a decrease of 15.6% or £1.0 billion in current prices from the four quarters to the end of Q2 2023. Of

this £5.6 billion:

• Total UK exports to Israel amounted to £3.0 billion in the four quarters to the end of Q2 2024 (a decrease of 12.2% or

£424 million in current prices, compared to the four quarters to the end of Q2 2023);

• Total UK imports from Israel amounted to £2.5 billion in the four quarters to the end of Q2 2024 (a decrease of 19.3%

or £604 million in current prices, compared to the four quarters to the end of Q2 2023