Britain is borrowing less than forecast, but its growing net worth deficit shows that it is failing to invest in its future

The UK borrowed £139.2 billion in the last financial year – £13.2 billion less than the latest OBR forecast – but the UK’s public sector net worth is also falling, and shows that the country is failing to invest in its future, the Resolution Foundation said today (Tuesday) in response to the latest ONS public sector finances.

The end of year (2022-23) public sector finances data showed that while government borrowing is high – at 5.5 per cent – it is below the OBR forecast at the Budget last month, driven by government spending coming in £17.2 billion lower than forecast. This is a higher deficit than 2021-22 (during the pandemic), and around double pre-pandemic levels, illustrating the extent to which the government has chosen to absorb the costs of higher energy through borrowing.

But while the deficit and debt as a share of GDP – two key metrics for the government’s fiscal rules – have come in better than expected, the ONS’ first ever inclusion of the UK’s public sector net worth paints a more worrying picture of the state of Britain’s public assets.

The UK has a public sector net worth – the value of its total assets minus its liabilities (including non-financial assets) – deficit of £605 billion, up from around £530 billion last year. This continues a long-term trend of significant decline in net worth, which has fallen substantially from the surpluses recorded by the OBR pre-financial crisis.

Along with high borrowing during repeated crises, this is the result of Britain’s long-term failure to invest in or manage well public assets. A narrow fiscal rule focus on net debt rather than net worth has given government’s too little incentive to turn this around, but doing so should be a priority in the decade ahead, says the Foundation.

Cara Pacitti, Senior Economist at the Resolution Foundation, said:

“The short-term picture of Britain’s public finances is looking better than it did at the time of last month’s Budget, with borrowing coming in £13.2 billion lower than forecast.

“But the big picture of significant borrowing in the face of surging energy prices last year and a longer term deterioration in Britain’s net worth – which incorporates the value of our public services and infrastructure – is far more worrying. A growing net worth deficit shows that we are failing to invest in our future, and we need to turn this record around urgently.”