UK Public Sector Borrowing Surges £1.5bn, Clouding Tax Cut Hopes
The Office for National Statistics has revealed a £1.5bn increase in public sector net borrowing compared to April 2023. This rise, partly driven by a decrease in national insurance contributions, has sparked debate about the government's fiscal position and the likelihood of tax cuts.
The Institute for Fiscal Studies has identified an extra £12bn at Chancellor Hunt's disposal, but advised against immediate and permanent tax cuts. Alex Kerr of Capital Economics is sceptical about significant tax cuts later this year. The IMF has warned the UK is set to miss its debt target and advised against pre-election tax cuts.
Borrowing figures are closely watched to assess the government's room for policy measures like tax cuts. The increase in spending, with government spending reaching £20.5bn in April, the fourth-highest April on record, outpaced a rise in public sector receipts, leading to higher public sector net borrowing.
Chancellor Hunt had suggested tax cuts before an election, but an election announcement on July 4 makes this almost impossible. The government and economic experts must now consider the implications of these borrowing figures and the IMF's warning on the UK's debt target.
