With a sluggish British economy, putting public finances on a sustainable path without reversing the massive tax cuts promised by London risks triggering deep cuts in state spending, a think tank warned on Tuesday.
UK Chancellor of the Exchequer Kwasi Kwarteng is set to detail his budget forecasts on October 31, after last month’s announcement of a massive, cost-free “growth plan” sent markets into a panic. Details of the financing of the measures, provided for by the public loan, are eagerly awaited. Fears are growing, in particular, about possible austerity measures that would cut public services, an idea that has so far been dismissed by the government of Prime Minister Liz Truss.
But public borrowing “is expected to reach nearly £200bn this year, its third-highest peak since the war, trailing only the peaks associated with covid and the financial crisis”, and will remain very high further. beyond that, predicts the Institute of Fiscal Studies. (IFS) group of experts in a statement.
A budget adjustment of 100 billion pounds over five years.
To stabilize debt as a percentage of GDP by 2026-27, the government “would have to announce more than £60bn in fiscal adjustment”, according to the IFS, with tough choices such as cuts to certain allocations, lower investment spending or cuts in the operating costs of public services.
The IFS points to the “enormous uncertainties about the exact scale of policy action needed”, but even if growth is boosted by tax cuts, as the government hopes, “an adjustment of around 40 billion euros would still be needed”. pounds by 2026-2027″. according to the study.
Reassure the markets after the panic at the end of September
The IFS insists on the need for a “credible strategy and plan for fiscal sustainability”, adding that markets will not be reassured by “plans based on an unlikely recovery in growth or vague promises of cuts in public spending in a distant future”. .
At the end of September, the Finance Minister announced a budget that included major aid for energy bills, given the cost of living crisis, but also significant tax cuts aimed above all at the wealthiest households.
The whole was not quantified but economists evaluated this package of measures at a colossal amount of 100 to 200 billion pounds, which had caused the pound to fall to an all-time low and the interests of the United Kingdom public debt to skyrocket , forcing the Bank of England. intervene to calm the markets.
Source: BFM TV
