UK Needs to Cut Spending by Over $66Bln to Stabilize Public Debt, Think-Tank Says
UK pound
MOSCOW (Sputnik) – The UK government will need to tighten fiscal policy and cut spending by more than 60 billion pounds ($66 billion) to stabilize public debt after announcing massive tax cuts, the Institute for Fiscal Studies (IFS) said on Tuesday.”The Chancellor, Kwasi Kwarteng, has promised a Fiscal Plan ‘to get debt falling in the medium-term.’ The core conclusion of this year’s IFS Green Budget, funded by the Nuffield Foundation and in association with Citi, is that, on a central forecast, he would need to announce a fiscal tightening of more than 60 billion pounds just to stabilise debt as a fraction of national income in 2026–27,” the IFS said in a report.To carry out even part of the planned reforms, the UK government will need to cut funding for public services by 14%, or even 27% if health care and defense were to be exempt from the cuts, the prominent think tank noted.
UK’s Debt to Reach 320% of Annual GDP in 50 Years If Measures Not Taken, OBR Says7 July, 18:29 GMTEven with an additional 0.25% economic growth each year, a tightening of some 40 billion pounds by 2026 will still be required to implement the government’s plan, the institute said.The IFS expects UK borrowing to reach almost 200 billion pounds this year, which is almost 100 billion more than the Office for Budget Responsibility predicted in March.Last week, UK Prime Minister Liz Truss promised to reduce public debt amid a flurry of criticism over the government’s new plan to support the economy, which includes large-scale tax cuts. After the plan’s announcement, the yield on five-year UK government bonds rose to its highest level since 2008, at 4.6%, which meant a decrease in demand for debt securities. Consequently, sterling fell to an all-time low of $1.054 per pound.
