According to the Office for National Statistics (ONS), the public sector borrowed £7.8 billion in December, roughly half compared to the same period last year and the lowest compared to 2022.
As per the Office for Budget Responsibility (OBR), borrowing was expected to be £14 billion, but in reality, it was significantly lower compared to the same period in 2019.
Chancellor Jeremy Hunt had previously announced that the proof is “clear” regarding countries enjoying higher economic growth with a lower tax burden. This is significant proof that the Conservative Party is hunting for tax cuts ahead of the general election.
Writing further in The Mail on Sunday, Hunt stated, “My priority in the upcoming spring budget will be to build on our progress and go even further to drive economic growth. Because if we can sustainably grow the economy, we can relieve the pressure on families and generate the revenue necessary to invest in the public services we all rely on.”
Chancellor Hunt will be delivering his next budget on March 6, hinting at lower tax cuts in a pre-election autumn statement.
The deputy chief UK economist at Capital Economics, Ruth Gregory, anticipates Hunt may have £20 billion in margin in March for tax cuts.
She stated: “With market interest rate expectations and long-dated gilt yields having fallen since November, we suspect the OBR will revise down its borrowing forecast significantly from 2025–26. That may provide the chancellor with “headroom” against his fiscal mandate of about £20bn in the budget.”
“That will probably allow him to unveil a freeze in fuel duty in April 2024 (costing about £6bn a year) but perhaps also to announce more crowd-pleasing measures, such as a 1p cut to income tax (costing £6.9bn a year), while still maintaining fiscally prudent appearances.”
Senior economist at KPMG UK, Michal Stelmach, cautioned that the Hunts margin can easily be upset if some of the downside risk materializes.
He conveyed: “The government’s implicit commitment to freeze fuel duty rates lowers revenue by £6 billion a year relative to current plans, while the assumption that real spending on unprotected departments would have to fall by over 2% a year is largely unrealistic in the absence of significant productivity improvements.”
“That’s before considering the longer-term pressures from an aging population, energy transition, and slowing workforce growth.”
The reassessment of student loan values a year ago, which increased the government’s books by $10 billion at the time, contributed to a portion of the decline.
Reduced interest rates on government debt that is index-linked contributed to the reduction in borrowing. £14.1 billion less than in December of the previous year, the government paid £4 billion in debt interest last month.
Chief Secretary to the Treasury Laura Trott stated that the economy is beginning to improve.
She conveyed: “Protecting millions of lives and livelihoods during [Vladimir] Putin’s energy shock and a once-in-a-century pandemic has created economic challenges. However, it is right that we pay back these debts so future generations are not left to pick up the tab.“
“Because of this government’s decisive action, the economy is now beginning to turn a corner. Inflation has more than halved. Debt is on track to fall as a share of the economy. And we have been able to afford tax cuts for 27 million working people and an £11 billion tax cut to drive business investment.”
The ONS stated that the overall government debt was roughly 97.7% of the UK’s annual gross domestic product (GDP), which is 1.9% higher than the previous year, and these levels were observed in the early 1960s.
- Published By Team Timeswire