Tax and spend as a share of national income

We are now spending around 6% of national income more than just before the pandemic or on the eve of the global financial crisis. Even though this would fall slightly on current plans (which would be very difficult to implement), public spending will still be around 3% of national income above its 2019-20 level in 2028-29. Even though spending on debt interest has nearly doubled compared to the average over the previous two decades, this is not the only driver of elevated spending.

Government revenues remained relatively flat through 2019-20 but have seen sharp increases since then, rising by more than 3% of national income since 2019-20, with further increases baked into current plans. This means that from 2026-27 onwards, we would raise more revenue than we spend on everything bar debt interest – the first primary surplus since 2001-02. But in a world of high interest rates and low growth, this is barely enough to stabilise debt in the medium term.