Public sector spending has outpaced income, escalating to a £20.2bn deficit in April, which raises concerns for the Chancellor regarding fiscal management. High bond yields, exacerbated by inflation spikes, increase government borrowing costs. The Office for Budget Responsibility warns that interest on debt might surpass £100bn annually. Low growth forecasts further complicate financial stability, limiting tax revenues and making deficit reduction difficult. The Chancellor should prioritize growth over deficit reduction, potentially by relaxing fiscal rules and encouraging investments to stimulate the economy.
Public sector spending has continued to significantly exceed income in April, leading to a spending deficit covered by borrowing of £20.2bn.
Yields on UK bonds are relatively high and have risen even further following the largest jump in inflation since the height of the inflation crisis in October 2022.
Despite hopes for a boost to the economy following this week's UK-EU deal, growth forecasts remain low.
Of the Government's two economic goals - cutting the deficit and creating a growing economy - they must prioritise growth.
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