Public finances still on the wrong path, warns IEA economist
Julian Jessop, Economics Fellow at free market think tank the Institute of Economic Affairs, commented on today’s ONS public sector finances figures
“The latest data on the state of the UK public finances are not as poor as the headlines suggest, but they are still bad.
“Borrowing in December was far higher than expected and a new record for the month. However, this overshoot mainly reflected changes in the accounting treatment of student loans. Total borrowing in the financial year-to-date was still £2.7 billion lower than recently forecast by the OBR.
“The December data were also boosted by two factors that should be temporary. One was the sharp rise in spending on energy support schemes, which should fall away this year as global energy prices drop and the schemes are rolled back.
“The other was a jump in interest payable on government debt, to £17.3 billion. However, £13.7 billion of this was accounted for the RPI uplift on the principal value of inflation index-linked bonds, and therefore money that will only be paid out in dribs and drabs over many years. The amount actually paid out in December itself was more like £3.6 billion.
“What’s more, the December data were based on the change in the RPI between September and October, when RPI inflation peaked. The headline numbers for debt interest payments should therefore fall sharply this year as well.
“Nonetheless, the public finances are on the wrong path and the Treasury will argue that the Chancellor has no headroom for tax cuts anytime soon. This is not necessarily right: tax cuts that support growth and boost the supply-side performance of the economy could actually help the public finances. But both borrowing and debt are already worryingly high.”
Notes to editors
Contact: email@example.com / 07763 365520
IEA spokespeople are available for interview and further comment.
Latest News from
Clear vision needed for health and social care23/02/2024 16:25:00
The Scottish Government needs to develop a clear national strategy for health and social care to address the pressures on services.
The IFS Scottish Budget Report – 2024–2523/02/2024 10:20:00
This report looks at the key budgetary and public service issues for the Scottish Government for the 2024–25 financial year and beyond.
IEA - Red tape has fuelled the cost of living crisis, argues new IEA paper22/02/2024 16:20:00
Since 2000, sectors with heavy state intervention have experienced large price rises while competitive markets have experienced price falls.
IFS - Scottish Government boosts support for students’ living costs, but further cuts funding for universities to teach them22/02/2024 10:20:00
How much does the Scottish Government spend on higher education, and what challenges does it face on university funding and living cost support?
Demos - New statistics confirm that the pandemic has had a sustained negative impact on employment in the UK – here’s how policy makers should respond22/02/2024 09:20:00
This week the ONS published new statistics about employment and jobs in the UK – the first time for a number of months due to problems with survey response rates. With the appropriate caveats that the figures are estimates based on survey data – and therefore, as always, they come with a margin of error – here’s what we learnt from the new statistics, and some of the implications for policy makers.
IPPR - Calls for ‘quick win’ changes to social security as claimants say system leaves them ‘scared, exhausted and drained’21/02/2024 15:05:00
A state of the nation report on the UK’s social security system concludes with a package of reforms to cut poverty, incentivise work and deliver quick wins to create a modern welfare system.
IFS - January usually sees the government run an overall surplus, as this is the month when a large chunk of self-assessment receipts is paid21/02/2024 13:10:00
Today’s ONS government borrowing figures suggest that the public sector ran a surplus of £16.7 billion in January. This is much bigger than the £7.5 billion surplus it ran in January 2023, and is the biggest January surplus on record.
King's Fund - An unhealthy end looms for the private finance initiative19/02/2024 09:20:00
The private finance initiative (PFI) was controversial from day one. Ten thousand or so days later it still is, as the first of these 25–30-year contracts for the private sector to finance, design, build and maintain public assets, including hospitals, come to an end.