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Zooming out further, migration also has broader impacts beyond its effects on the public finances. Just as for other areas of policy, these wider impacts should also be considered when policy is made.

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Migration also has longer-run fiscal impacts, which might not matter for headroom at the Budget, but could still make a big difference going forward. Most immigrants don’t stay in the UK long-term, but fiscal effects for those who do will change as they age.

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In the same OBR scenario of 100k extra migration per year, it estimated that maintaining public service quality could cost ~£3bn in the fifth year of the forecast, or 1/3 of the extra tax revenues. This reflects that in general, spending on working age people tends to be lower.

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The story is more complex for public service spending. It is up to the government to decide how to respond to additional pressure on public services, so at the Budget the OBR is required to keep public service spending plans unchanged in response to changes in migration.

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At least in the short run, impacts on benefit spending are much smaller: most new immigrants are automatically ineligible for benefits for at least 5 years. This could change in the longer run as more migrants who stay become able to claim benefits if they are eligible.

These are rough estimates, and the composition of migrants will matter a lot too. There are likely big differences by route – with those moving to the UK to work unsurprisingly more likely to work (and so likely to pay more in tax) than those studying or seeking asylum.

One OBR scenario estimated that 100k extra immigrants per year over 5 years (so 500k extra in total) could increase annual receipts by £9bn after 5 years.

We’d expect higher migration – if it resembled the current composition of migration – to increase tax revenues, in part because most new migrants are currently working age.

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The fiscal impacts of any given rise or fall in migration will depend on the characteristics of migrants, including their age and employment. This will affect tax revenues, benefit spending and public service spending.

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Eduin Latimer @eduinlatimer.bsky.social · 24/07/2026

Migration could be quite important at this year’s budget, as falling migration feeds through into the OBR’s forecast and the government’s “headroom” against its fiscal rules. Given this, a thread on how migration affects the public finances:

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This is the most important chart for understanding how working-age benefit spending has changed over last two decades. In overall levels spending as % of GDP is lower now that it was in 2012, but the composition of that spending is very different.

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Nick Ridpath @nickridpath.bsky.social · 22/07/2026

Lots you could say about this, but one thing it matters for is the fiscal rules. With policies this size it's not a huge difference, but day-to-day spending increases combined with capital cuts move the government closer to the binding fiscal rule of a current budget balance in 29/30

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Nick Ridpath @nickridpath.bsky.social · 22/07/2026

Great piece from Max. One noteworthy point on both the VAT cut and today’s bus fare cap is both costs are mostly being covered by cuts to capital spending. There’s a pattern emerging of increasing shifts towards day-to-day spending (and tax cuts) as a focus

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Income tax receipts and welfare spending were both also above forecast - we would expect higher prices to push both up further going forward.

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With energy supply constraints still around, this may be a story that sticks around: we may continue to see pressure on the debt interest bill - which is already very high by historical standards - over the next few months.

Government debt interest spending in the first three months of the financial year was above forecast. A portion of our debt is inflation-linked, and higher than expected inflation - due to the closure of the Strait of Hormuz - has pushed up the interest we pay on that debt.

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There'll be lots of discussion of effect of inflation on households today. But today's ONS figures are a reminder that impact of inflation on broader public finances are also something Andy Burnham and John Healey will have to think about:

Bee Boileau @beeboileau.bsky.social · 30/06/2026

Reposted by Nick Ridpath

On the Defence Investment Plan top-ups: the political turmoil surrounding top-ups averaging <£4bn/year feels like a small taste of what's in store over the next decade if we want to hit the 3.5% NATO commitment - which would require (much!) more defence money

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What this means is that the current fiscal rules severely limit the scope for extra borrowing, including for infrastructure investment. If the government nevertheless wants to significantly increase it, it would need to look at tax increases or spending cuts elsewhere instead.

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They could also try to borrow more within the fiscal rules: at the last forecast, the margin against the debt rule was £27bn - but we've seen in recent years what happens when you get too close to breaching the fiscal rules, so there would be reason for caution there.

Public sector net worth as a fiscal target | Institute for Fiscal Studies

Another measure, Public Sector Net Worth (PSNW), also includes these physical assets. It is an interesting measure, but targeting it in a fiscal rule would be ill-advised, as my former colleague @benzaranko.bsky.social wrote about a few years ago: ifs.org.uk/publications...

ifs.org.uk

We consider the case for and against a fiscal target for public sector net worth.

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What PSNFL doesn't include is the government's physical assets - things like buildings, land, or roads or railways. What this means is that if the government borrows more to invest in these kinds of assets, it shows up as higher PSNFL, pushing against the fiscal rules.

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PSNFL includes the government's debt, but it also includes other financial assets and liabilities - think of the student loan book as a financial asset the govt holds, or local government pensions as a financial liability the govt will have to cover

The government's current debt rule places limits on borrowing for investment: it mandates that Public Sector Net Financial Liabilities (or PSNFL) be falling as a % of GDP in the third year of the forecast - i.e. debt should be coming down by then

Nick Ridpath @nickridpath.bsky.social · 10/06/2026

Could the government borrow more to fund investment in infrastructure? There's a case for borrowing for productive investment, but there isn't one simple trick to substantially increase borrowing within the current fiscal rules. A short thread:

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Really important context from Max below: the funding gap the government might need to fill for the Defence Investment Plan is far, far below the amount that would eventually be needed to reach 3.5% of GDP on defence spending

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Eduin Latimer @eduinlatimer.bsky.social · 28/05/2026

This is most striking figure from Millburn Review. They estimate that around half of the 18-24 population who are not in education, employment or training (NEET) are not claiming any benefits. This limits how effective any reforms to the benefit system can be in reducing the NEET rate.

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Max Warner @maxwarner.bsky.social · 15/05/2026

It wasn’t the biggest story yesterday, but the NHS in England hit its intermediate target that 65% of patients should be waiting 18 weeks or less for elective care by Mar26. That’s after big recent improvements from 61.5% in Jan to 65.3% in March. So how was this achieved?🧵

Chart showing performance against the govt's 18 week target

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Nick Ridpath @nickridpath.bsky.social · 14/05/2026

Pretty good news on growth in the first quarter of the year today, but worth not over-interpreting. In each of the last four years, we've seen higher growth in Q1 than later in the year - you'd want to see good news later in the year to think this is a sign of a genuine improvement.

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Nick Ridpath @nickridpath.bsky.social · 12/05/2026

Lot of discussion of possible tweaks to the fiscal rules. Worth noting a 10 year rule would make it even easier for a Chancellor to meet the rule just by promising cuts well into future parliaments. And that makes it very hard for the rule to constrain borrowing in the short term.

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Nick Ridpath @nickridpath.bsky.social · 28/04/2026

The current debt rule requires debt as %GDP to fall between years two and three. The proposal would ensure government plans brought debt down (though plans would still need to be implemented), but would place much greater restrictions on borrowing than current rules, especially in the short run

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Nick Ridpath @nickridpath.bsky.social · 28/04/2026

The House of Lords Economic Affairs committee has just published a report on the fiscal framework. One fairly major suggestion: that the government set out an additional fiscal target, in which debt as a share of GDP is lower in the third year of the forecast than in the first year in normal times

committees.parliament.uk

Fortifying the fiscal framework report published - Committees - UK Parliament

The House of Lords Economic Affairs Committee has today published its report, ‘Fortifying the fiscal framework’.

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Nick Ridpath @nickridpath.bsky.social · 12/03/2026

However, important to say we're not in this pessimistic scenario yet - the gas price increase is well below the aftermath of the Russian invasion of Ukraine, though it remains to be seen what happens to oil prices. But the risk to the public finances still a key point to bear in mind going forward.

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Nick Ridpath @nickridpath.bsky.social · 12/03/2026

The OBR has modelled a pessimistic scenario in the past, discussed in our Spring Forecast response last week. A 75% spike in energy prices for a year - not a projection from us or the OBR, to be clear - could mean a 5% spike in inflation, lower growth, and £20-40bn more borrowing in the medium term

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Nick Ridpath @nickridpath.bsky.social · 12/03/2026

Key context to talk about the cost of any potential energy support package: an energy price shock is already bad news in itself for the public finances. Higher inflation and interest rates would push up debt interest spending, welfare spending, and put pressure on public services.

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PoliticsHome @politicshome.bsky.social · 06/03/2026

🚨 OUT NOW 🚨 What did we learn from the Spring Statement? 📈 Labour MP @lukemurphy.bsky.social, Resolution Foundation's @jamessmithrf.bsky.social and the IFS's @nickridpath.bsky.social join @alaintolhurst.bsky.social to discuss the state of the economy 🎧 Listen now: pod.fo/e/39ea85

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Bee Boileau @beeboileau.bsky.social · 04/03/2026

(Sidenote: this is an average - worth noting how weird the profile looks. Growth much slower in 2029-30, perhaps coincidentally the year the fiscal rules currently bind, before speeding up again thereafter...)

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Nick Ridpath @nickridpath.bsky.social · 04/03/2026

There's lots of uncertainty about unemployment rise - OBR has consistently forecast it to come down quickly, but Bank of England suggest higher unemployment could be sustained for a few years. This is v important for the public finances - sustained higher unemployment could hit borrowing hard.

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Nick Ridpath @nickridpath.bsky.social · 04/03/2026

This is a really key point from Ben. The recent debate has focused so much on how the govt can make the numbers add up to get a forecast current budget surplus. But a forecast budget surplus is not the same as actually running a budget surplus - delivering this will be the real challenge.

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Nick Ridpath @nickridpath.bsky.social · 04/03/2026

The Spring Forecast had a higher revenue forecast, driven mainly by higher equity prices (up 8% between forecasts) adding £9bn extra receipts in 2030/31. This is good news - but equities move regularly: given global volatility, there’s a risk higher forecast could be temporary.

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Nick Ridpath @nickridpath.bsky.social · 03/03/2026

The OBR has revised its annual net migration forecast down by 50-100k, with a small negative impact on forecast tax revenues. If new ONS data for this year shows lower immigration, the OBR could further reduce their net migration assumption, with larger effects on tax revenues.

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Nick Ridpath @nickridpath.bsky.social · 03/03/2026

The OBR’s current budget forecast has barely changed, with borrowing still set to fall over the next few years. Past governments have often set out plans for a current budget surplus, but it’s very rare that they’ve achieved it. That will be the key challenge going forward.

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But for the purposes of the official forecast (and so performance against the fiscal rules), the OBR modelling is what matters. A sustained drop in net migration therefore poses a risk for the Chancellor to worry about – a risk that could crystallise later this year.

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There are legitimate questions about how the OBR model the effects of migration – e.g. they account for impacts on tax revenues and welfare spending, but not on the cost of delivering public services (where budgets are treated as fixed).

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The OBR will very likely wait for more data before adjusting their migration forecast, but if the recent fall in migration is sustained, and the medium-term projection is revised downwards, it could hit tax revenues and push up their borrowing forecast substantially.

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We're expecting a quiet Spring Forecast, without major policy changes or forecast revisions. But there are still things to keep an eye on. One important one is the migration forecast, where recent data highlights potential risks to the forecast in future. A quick thread: