Rishi Sunak has “only just” got the public finances under control and doesn’t have much room for manoeuvre, the director of the Institute for Fiscal Studies (IFS) has said.
As figures showed interest on public debt reaching record levels, Paul Johnson said the Chancellor did not have much scope for increased spending or tax cuts.
i has reported how Mr Sunak told Tory MPs they would have to choose between continued spending packages and tax reductions, warning they cannot have both.
Speaking on the BBC Radio 4’s Today programme, Mr Johnson said: “I think he probably feels he’s got the public finances just about under control – but given his own targets to get the current budget balanced over the next few years, only just under control. So this doesn’t mean that he’s got lots of room for manoeuvre, given his own targets.”
He said the big question was whether the Chancellor would announce additional cost-of-living support in his spring statement in March.
Mr Sunak said: “We provided unprecedented support throughout the pandemic to protect families and businesses and it has worked, with the UK seeing the fastest economic growth in the G7 last year.
“But our debt has increased substantially and there are further pressures on the public finances, including from rising inflation.
“Keeping the public finances on a sustainable path is crucial so we can continue helping the British people when needed, without burdening future generations with high debt repayments.”
Interest payments on Government borrowing reached £6.1 billion in January, compared to just £1.6 billion in the same month a year ago, as inflation used on debt payments hit 7.8 per cent.
The rise is still lower than the all-time record of £9 billion in interest rate payments made in June last year, but inflation is set to rise further – with interest rates to follow.
The Office for National Statistics (ONS) has revealed that higher than expected tax returns from self-employed people brought in £18.4 billion in January, compared with £16.4 billion last year.
This has helped to reduce borrowing levels to a surplus of £2.9 billion, compared to a deficit of £2.5 billion a year earlier.
It is, however, £7 billion below the surplus recorded in January 2020 before the pandemic.
The ONS added that public sector borrowing from the end of March to December was £138.5 billion – the second highest since records began in 1993.