Doubts have been raised about the government’s ability to reveal tax cuts before the next general election, after official figures revealed that debt was higher than expected last year.
The Treasury lent £120.7 billion in the financial year ending March 2024 – down £7.6 billion on the previous year, according to provisional estimates from the Office for National Statistics (ONS).
However, the value is £6.6 billion higher than Office for Budget Responsibility (OBR) forecast just a month ago.
Overall, public debt was around 98.3% of the UK’s annual gross domestic product (GDP) in March – an increase of 2.6 percentage points on the previous year and at levels not seen since the start of the 1960s.
Ruth Gregory, economist at Capital Economics, said: “If the Chancellor expected the March figures to provide more scope for tax cuts in a fiscal event later this year, he will have been disappointed.
“Just based on the larger than expected 2023/24 budget deficit and the recent shift in the market interest ratehe may have even less fiscal “room” (perhaps around £5 billion) for tax cuts than the £8.9 billion left over in March.”
Rob Wood of Pantheon Macroeconomics said he still expects the chancellor to cut taxes, but warned that this would leave a financial headache for the Treasury after the next election, expected in the autumn.
He said: “[Jeremy] Hunt can engineer another year of unrealistically weak public spending to generate “margin” against his fiscal rules and thus manufacture the funds to cut taxes.
“The next government will therefore face a complicated choice between raising taxes to fix failing public services or staying in line on the Chancellor’s recent tax cuts.”
Lord hunt cut national insurance by 2p in the budget earlier this year and said he would like to reduce taxes further.
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Jessica Barnaby, ONS deputy director for public sector finance, said: “Spending rose by around £58 billion, with increases in spending on public services and benefits outweighing large reductions in interest payable and scheme costs. energy support. But with public sector revenue increasing by £66 billion overall, the deficit still fell.
“At the end of the year, debt remained close to the annual value of the economy’s output, at levels last seen in the early 1960s.”
The figures also revealed that benefit payments increased by £36.9 billion to £291.4 billion during the year, amid inflation-linked increases and additional cost of living support.
Central government salaries rose by £21 billion, including health and education, but inflation-linked debt fell by 27% to £78.3 billion.
Inheritance tax revenues also rose to a record high of almost £7.5 billion.
A Treasury spokesperson said: “Debt has risen in recent years because we correctly protected millions of jobs during COVID and paid half of people’s energy bills afterwards. [Vladimir] Putin’s invasion of Ukraine sent bills skyrocketing.
“We can’t leave future generations to foot the bill, so we have to stick to the plan to reduce debt. And with inflation falling and wages rising – we managed to reduce national insurance by a third, which shows our determination to end double taxation of labor”.
This story originally appeared on News.sky.com read the full story
