IEA economist comments on todays public sector finances data

From: Think Tanks
Published: Tue Mar 22 2022

Julian Jessop, Economics Fellow at free market think tank the Institute of Economic Affairs, commented on the figures

The UK government borrowed about 5 billion more than expected in February, as higher debt interest costs offset a rise in tax revenues. Nonetheless, favourable revisions to past months mean that borrowing is still on track to undershoot the OBR's forecast for the fiscal year 2021-22 by about 24 billion.

Looking forward, rising inflation will keep debt servicing costs high. But OBR analysis (published in last October's Economic and Fiscal Outlook) has already shown that an inflation shock is likely to reduce borrowing overall, thanks to the boost to revenues, even with much larger hikes in official interest rates.

Inflation will surely reduce the burden of debt relative to national income, especially with real interest rates likely to remain low - even negative - for the foreseeable future. Indeed, debt has already fallen to 94.7 per cent of GDP, from a recent peak of more than 100 per cent.

In short, there is nothing in these numbers to prevent the Chancellor from easing the pressure on households and businesses in tomorrow's Spring Statement.

Notes to editors

Contact: Emily Carver, Head of Media, 07715 942 731

IEA spokespeople are available for interview and further comment.

Public sector finances, UK: February 2022

Company: Think Tanks

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