LONDON (Businesshala) – Britain’s borrowing is set to decline faster than official forecasts as the economy recovers from the COVID-19 pandemic but has limited room for higher spending to meet Prime Minister Boris Johnson’s promises, a Leading think tank said.
The Institute for Fiscal Studies (IFS) has projected that public borrowing for the 2021-22 fiscal year will fall to 180 billion pounds ($245 billion), still one of the highest readings on record, but attributable to budget responsibility. 54 billion pounds less than the government office. (OBR) forecast in March.
Britain borrowed a record £325 billion in the last financial year – the equivalent of 15% of GDP – as the government spent heavily on healthcare as well as support for furloughed workers and businesses during the pandemic.
New budget forecasts from Finance Minister Rishi Sunak OBR, as well as long-term spending plans, will be set for 27 October, when the government hopes to refocus on the ‘flatten-up’ poorer parts of England where pro-Brexit Voters were incensed. In support of the Conservative Party in the December 2019 election.
However, IFS said Sunak will have less cash to play with, as the headline decline in lending may suggest.
IFS Director Paul Johnson said: “The combined effect of ever-increasing spending on the National Health Service and a smaller economy than projected pre-pandemic is that they are likely to still be short of money to spend on many other public services. “
Rising loan interest payments – due to Britain’s large stock of inflation-linked bonds – and long-term losses from COVID-19 and Brexit mean that lending is likely to fall more slowly in future years .
Sunak has already announced higher payroll taxes for workers and employers from April and plans to sharply increase the tax rate on company profits a year later.
The IFS said the tax burden would rise to its highest sustained level since at least the mid-1950s.
From a sunken point of view, the profile of day-to-day spending on public services is expected to grow by an average of 3.2% in real over the next three years – in contrast to the decade of austerity spending cuts following the 2008-09 financial crisis.
But much of that growth has been earmarked for higher spending on healthcare, schools and defence, leaving sectors such as further education, prisons and local services facing short-term cuts and less than 1% a year. medium term growth.
“It may be difficult to reconcile the government’s promises on leveling up and social care reform,” the IFS said.
($1 = 0.7332 pounds)