Doubts have been raised over the federal government’s potential to unveil tax cuts forward of the subsequent normal election after official figures revealed borrowing was increased than anticipated prior to now 12 months.
The Treasury borrowed £120.7bn within the monetary 12 months ending March 2024 – down £7.6bn from the 12 months earlier than, in keeping with provisional estimates from the Workplace for Nationwide Statistics (ONS).
Nevertheless, the determine is £6.6bn greater than forecast by the Workplace for Finances Duty (OBR) solely a month in the past.
Total, authorities debt was round 98.3% of the UK’s annual gross home product (GDP) in March – up 2.6 share factors from the earlier 12 months and at ranges not seen for the reason that early Sixties.
Ruth Gregory, an economist from Capital Economics, mentioned: “If the chancellor hoped March’s figures would supply extra scope for tax cuts at a fiscal occasion later this 12 months, he can have been upset.
“Simply based mostly on the larger-than-expected 2023/24 funds deficit and the latest shift up in market rates of interest, he might have even much less fiscal ‘headroom’ (maybe about £5bn) for tax cuts than the £8.9bn left over in March.”
Rob Wooden, from Pantheon Macroeconomics, mentioned he nonetheless anticipated the chancellor to chop taxes, however warned it could go away a monetary headache for the Treasury after the subsequent election, which is predicted within the autumn.
He mentioned: “[Jeremy] Hunt can plan for an additional 12 months of unrealistically weak public spending to generate ‘headroom’ in opposition to his fiscal guidelines and thereby manufacture the funds to chop taxes.
“The following authorities will, due to this fact, face a difficult alternative between elevating taxes to repair creaking public providers or holding the road on the chancellor’s latest tax cuts.”
Jessica Barnaby, the ONS’s deputy director for public sector funds, mentioned: “Spending was up about £58bn, with elevated spending on public providers and advantages outstripping giant reductions in curiosity payable and vitality help scheme prices. However with public sector earnings up £66bn, general, the deficit nonetheless fell.
“On the finish of the monetary 12 months, debt remained near the annual worth of the output of the economic system, at ranges final seen within the early Sixties.”
A spokesperson for the Treasury mentioned: “Debt elevated lately as a result of we rightly protected tens of millions of jobs throughout COVID and paid half of individuals’s vitality payments after Putin’s invasion of Ukraine despatched payments skyrocketing.
“We will not go away future generations to select up the tab, so we should persist with the plan to get debt falling. And with inflation falling and wages rising – we have now been capable of minimize nationwide insurance coverage by a 3rd, which exhibits our willpower to finish the double taxation of labor”.
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