London Daily

Focus on the big picture.
Saturday, Feb 22, 2025

UK to unveil record £400 billion borrowing plan next week

UK to unveil record £400 billion borrowing plan next week

British finance minister Rishi Sunak will announce the heaviest public borrowing since World War Two when he spells out his spending plans next week after the biggest economic crash in over 300 years.

With Britain in the midst of a second wave of COVID-19 cases and economic recovery on hold, Sunak has postponed longer-term plans for the public finances.

Spending on the pandemic is on track to exceed 200 billion pounds this year after the extension of job protection programmes, and other costs are likely to spill into the 2021/22 fiscal year.

Only the armed forces will receive a multi-year increase in funding as Prime Minister Boris Johnson seeks to boost Britain’s profile outside the European Union.

Sunak’s other spending announcements on Wednesday are likely to be dwarfed by the scale of new borrowing forecasts which will underscore the need for future tax rises.

“Events next week might... prove an important prelude for a pivot to a tighter fiscal approach in the spring budget,” economists at Citi said in a note to clients.

As Sunak starts to look for ways to begin reining in the huge surge in borrowing, media reported that he plans to freeze pay for public-sector workers other than health staff.

Prime Minister Boris Johnson has refused to commit to maintaining spending on overseas aid.

Britain’s economy shrank by 20% between April and June, more than any other major economy, and it has been slower to recover.

The Bank of England has pencilled in an 11% fall in GDP for 2020, a drop last seen in 1709.

Government borrowing this financial year is likely to be around 400 billion pounds, according to Citi, while HSBC has forecast 365 billion pounds.

This is equivalent to between 17% and 20% of GDP, well above its 10% peak at the height of the global financial crisis.

Data published on Friday showed 215 billion pounds of borrowing in just the first seven months of this financial year, nearly five times more than at the same point in 2019.

This is likely to fall as emergency pandemic spending is scaled back but HSBC expects it will be a still unsustainable 8.5% of GDP in 2021/22.

Citi predict an extra 800 billion pounds of borrowing over the next five years, compared with forecasts in March.

TAX RISES


Sunak has warned of hard decisions ahead to get the public finances “on a sustainable path” over time.

Big spending cuts are less likely than after the financial crisis because public service have undergone a decade-long squeeze and pressures from an ageing population are growing.

The scale of any tax rises will not become clear until the economy is on a more even keel.

The Resolution Foundation think tank says tax rises raising 40 billion pounds a year will be needed before the 2024 election just to stabilise the public finances and fund social care.

For now financial markets are happy to fund the borrowing at almost record low interest rates. Britain’s Debt Management Office will publish bond sale plans on Wednesday.

HSBC sees a further 100 billion pounds of gilt issuance this financial year, taking the total to a record 480 billion pounds, and up to 300 billion pounds more in 2021/22.

The government will also publish a delayed review on when to phase out the RPI measure of inflation used to calculate payments on inflation-linked bonds, which now overstates price rises.

Newsletter

Related Articles

0:00
0:00
Close
UK Prison Officer Sentenced for Inappropriate Conduct with Inmate
Good News: Senate Confirms Kash Patel as FBI Director
Officials from the U.S. and Hungary Engage in Talks on Economic Collaboration and Sanctions Strategy
James Bond Franchise Transitions to Amazon MGM Studios
Technology Giants Ramp Up Lobbying Initiatives Against Strict EU Regulations
Alibaba Exceeds Quarterly Projections Fueled by Growth in Cloud and AI
Tequila Sector Faces Surplus Crisis as Agave Prices Dive Sharply
Residents of Flintshire Mobile Home Park Grapple with Maintenance Issues and Uncertain Future
Ronan Keating Criticizes Irish Justice System Following Fatal Crash Involving His Brother
Gordon Ramsay's Lucky Cat Restaurant Faces Unprecedented Theft
Israeli Family Mourns Loss of Peace Advocate Oded Lifschitz as Body Returned from Gaza
Former UK Defense Chief Calls for Enhanced European Support for Ukraine
Pope Francis Admitted to Hospital in Rome Amid Rising Succession Speculation
Senate Republican Leader Mitch McConnell, at the age of 83, Declares His Retirement.
Whistleblower Reveals Whitehall’s Focus on Kabul Animal Airlift Amid Crisis
Politicians Who Deliberately Lie Could Face Removal from Office in Wales
Scottish Labour Faces Challenges Ahead of 2026 Holyrood Elections
Leftwing Activists Less Likely to Work with Political Rivals, Study Finds
Boris Johnson to Host 'An Evening with Boris Johnson' at Edinburgh's Usher Hall
Planned Change in British Citizenship Rules Faces First Legal Challenge
Northumberland Postal Worker Sentenced for Sexual Assaults During Deliveries
British Journalist Missing in Brazil for 11 Days
Tesco Fixes Website Glitch That Disrupted Online Grocery Orders
Amnesty International Critiques UK's Predictive Policing Practices
Burglar Jailed After Falling into Home-Made Trap in Blyth
Sellafield Nuclear Site Exits Special Measures for Physical Security Amid Ongoing Cybersecurity Concerns
Avian Influenza Impact on Seals in Norfolk: Four Deaths Confirmed
First Arrest Under Scotland's Abortion Clinic Buffer Zone Law Amidst International Controversy
Meghan Markle Rebrands Lifestyle Venture as 'As Ever' Ahead of Netflix Series Launch
Inter-Island Ferry Services Between Guernsey and Jersey Set to Expand
Significant Proportion of Cancer Patients in England and Wales Not Receiving Recommended Treatments
Final Consultation Launched for Vyrnwy Frankton Power Line Project
Drug Misuse Deaths in Scotland Rise by 12% in 2023
Failed £100 Million Cocaine Smuggling Operation in the Scottish Highlands
Central Cee Equals MOBO Awards Record; Bashy and Ayra Starr Among Top Honorees
EastEnders: Four Decades of Challenging Social Norms
Jonathan Bailey Channels 'Succession' in Bold Richard II Performance
Northern Ireland's First Astronaut Engages in Rigorous Spacewalk Training
Former Postman Sentenced for Series of Sexual Offences in Northumberland
Record Surge in Anti-Muslim Hate Crimes Across the UK in 2024
Omagh Bombing Inquiry Concludes Commemorative Hearings with Survivor Testimonies
UK Government Introduces 'Ronan's Law' to Combat Online Knife Sales to Minors
Metal Detectorists Unearth 15th-Century Coin Hoard in Scottish Borders
Woman Charged in 1978 Death of Five-Year-Old Girl in South London
Expanding Sinkhole in Godstone, Surrey, Forces Evacuations and Road Closures
Bangor University Announces Plans to Cut 200 Jobs Amid £15 Million Savings Target
British Journalist Charlotte Peet Reported Missing in Brazil
UK Inflation Rises to 3% in January Amid Higher Food Prices and School Fees
Starmer Defends Zelensky Amidst Trump's 'Dictator' Allegation
Zelensky Calls on World Leaders to Back Peace Efforts in Light of Strains with Trump
×