"As in all years, the chancellor has to strike a balance between: Raising the money needed to fund the services that voters demand. Keeping taxes at levels that are acceptable to voters. Persuading the government's creditors in the bond markets that it will continue to be able to pay its debts. In our game you get to try your hand at designing a successful budget. Can you keep backbenchers happy without upsetting the bond markets?"
"At the spring statement, Reeves had left herself 9.9bn of headroom against her fiscal rules, which require day-to-day spending to be matched by receipts by the end of this parliament. However, the buffer is widely expected to have been more than wiped out by three things: higher borrowing costs; welfare U-turns; and an anticipated productivity downgrade from the Office for Budget Responsibility. Taken together, the Institute for Fiscal Studies predicts government borrowing could be 22bn higher in 2029-30 than forecast in March."
The public finances begin the period in the red with only £9.9bn of headroom after the spring statement. That headroom is expected to have been erased by higher borrowing costs, welfare U-turns and a likely productivity downgrade from the Office for Budget Responsibility. The Institute for Fiscal Studies estimates borrowing could be about £22bn higher in 2029–30 than forecast in March. Meeting the fiscal rule requires roughly £12bn of tax rises or spending cuts, while restoring previous headroom would need £22bn. City investors expect a larger buffer (around £20bn) to calm bond markets, narrowing political options.
Read at www.theguardian.com
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