British Chancellor of the Exchequer Jeremy Hunt speaks during the press conference on the day he signs cooperation pact on financial services with European Commissioner for Financial Stability, Financial Services and the Capital Markets Union Mairead McGuinness, in Brussels, Belgium June 27, 2023. REUTERS/Yves Herman/File Photo Acquire Licensing Rights
LONDON, Aug 22 (Reuters Breakingviews) – Higher tax receipts helped Britain to borrow less than expected in July. That doesn’t help finance minister Jeremy Hunt much. The UK’s poor economic health leaves him with little room for fiscal giveaways ahead of a prospective 2024 election.
Public sector net borrowing stood at 4.3 billion pounds in July, less than the 5 billion pounds expected by economists polled by Reuters. In the first four months of the fiscal year, borrowing was 11.3 billion pounds below the Office for Budget Responsibility’s forecast.
That’s the end of the good news. As gross domestic product slows to an expected 0.5% this year, tax revenue will shrink. The recent rise in bond yields will add around 18 billion pounds to debt interest spending by 2027/28, says Capital Economics. Hunt has vowed to reduce debt as a percentage of GDP by 2028. To achieve that, he will have to keep vote-boosting tax cuts to a minimum. (By Francesco Guerrera)
(The author is a Reuters Breakingviews columnist. The opinions expressed are their own.)
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UK’s improving finances will bear no fiscal gifts
