The chancellor is set to present her spring statement in March, where she is reportedly planning several billion pounds of cuts to meet the government’s fiscal rules.[1] Yet despite a stated commitment to fiscal discipline public spending remains at historically high levels, forecast to reach a record £1.5 trillion by 2029-30. Spending has already been elevated since the covid-19 pandemic, with the chancellor’s October 2024 budget meeting her fiscal rules by only ‘a very fine margin’,[2] despite raising taxes by £40 billion.[3]
This situation will worsen as the Office for Budget Responsibility (OBR) is expected to cut growth forecasts for the UK economy, restricting the fiscal space available to the chancellor.[4] While limiting spending plans may allow the chancellor to remain within her rules in the short term, failure to address a historically unprecedented spending burden will inevitably leave the public finances stretched.
This note analyses the trajectory of public spending, placing it in the post-second world war historical context and benchmarks the current government against its predecessors.
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Key findings
- Public spending is set to rise to a record high of £1.27 trillion in 2025-26, £23.2 billion more than spending at the peak of the pandemic in 2020-21 and up 20 per cent from pre pandemic levels.[5]
- By 2029-30, public spending per household is set to reach £45,184, up from £43,670 in 2024-25.[6]
- By the end of this parliament, real terms public spending is set to be more than double what it was at the turn of the millennium, £1.32 trillion in 2028-29 compared to £654 billion in 1999-00.
- The current government is forecast to spend a total of £6.43 trillion by the end of this parliament.
- Public spending is set to be 45.3 per cent of GDP in 2025-26. This level of spending has only been surpassed on four occasions in the post war era:
- At the height of the covid-19 pandemic in 2020-21 when it was 53 per cent.
- In the wake of the great financial crisis when it was 46.4 and 45.7 per cent from 2009-11.
- During the sterling crisis in 1975-76 when it was 46.5 per cent.
- While spending fell after the latter two crises, it has remained at historically high levels following the covid-19 pandemic, suggesting a permanent expansion of the state.
- Margaret Thatcher achieved the lowest level of public spending as a percentage of GDP in the postwar era, being 34.6 per cent of GDP in 1988-89.
- As a percentage of GDP, average spending under Keir Starmer is set to be the second highest of any post war prime minister at 45 per cent. Only Boris Johnson, who presided over the covid-19 pandemic, exceeds this at 45.4 per cent.
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Keir Starmer is set to preside over four of the ten years with the highest spending since 1948:
- Boris Johnson presided over two.
- David Cameron, Gordon Brown, James Callaghan and Harold Wilson presided over one each.
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[1] Islam, F., Chancellor set to cut welfare spending by billions, BBC, 5 March 2025, www.bbc.co.uk/news/articles/c1lpjqg2mp5o, (accessed 6 March 2025).
[2] Boileau, B et al., A look ahead to the 2025 Spring Forecast, Institute for Fiscal Studies, 6 March 2025, ifs.org.uk/articles/look-ahead-2025-spring-forecast, (accessed 6 March 2025).
[3] Wheeler, B., This is not a Budget we want to repeat, says Reeves, BBC, 30 October 2024, www.bbc.co.uk/news/articles/c86q31wlj39o, (accessed 10 March 2025).
[4] Fleming, S., Reeves faces having to cut spending or raise taxes as UK growth disappoints, Financial Times, 11 February 2025.
[5] All figures in 2023-24 prices.
[6] See methodology.