Latest news with #public finances
Zawya
6 hours ago
- Business
- Zawya
IMF sees risk that UK is knocked off course to fix public finances
The International Monetary Fund said Britain's government risked being knocked off course for meeting its targets to repair the public finances and it urged finance minister Rachel Reeves to give herself more leeway through tax or spending measures. In a final version of an annual report on Britain's economy, the IMF said changes introduced by Reeves to the government's deficit reduction plans had enhanced the credibility and effectiveness of fiscal policy. "Risks to this strategy must be carefully managed. In an uncertain global environment and with limited fiscal headroom, fiscal rules could easily be breached if growth disappoints or interest rate shocks materialize," the IMF said. The Fund also said the risk of overly-frequent changes to tax and spending policy could be reduced by changes including the creation of more fiscal room for manoeuvre by Reeves to meet her targets. "The first best (option) would be to maintain more headroom under the rules, so that small changes in the outlook do not compromise assessments of rule compliance," it said. In response to the report, Reeves said in a statement that the Fund had backed her choices for Britain's economy to recover and that her plans would "tackle the deep-rooted economic challenges that we inherited in the face of global headwinds." Reeves is under pressure to raise taxes later this year to remain on course to meet her budget targets, having already increased social security contributions paid by employers and along with revenue-raising measures in late 2024. (Writing by William Schomberg, editing by William James)
Zawya
3 days ago
- Business
- Zawya
Sterling holds on to gains, investors mull rise in borrowing
The pound steadied on Tuesday, consolidating after the previous day's rally, as investors took stock of data that showed UK government borrowing soared in June, a reminder of the fragility of Britain's public finances. Sterling, which rose 0.6% on Monday, its biggest one-day gain in a month, was last at $1.3493, showing little change on the day. It was also steady against the euro , which was at 86.7 pence. Britain borrowed more than expected in June as high inflation added to the government's debt costs, according to official data that is likely to add to speculation about the need for fresh tax increases later this year. Public sector net borrowing totalled 20.7 billion pounds ($27.9 billion) last month, the data showed. This compares with a forecast of 17.1 billion pounds for June from the Office for Budget Responsibility, the budget watchdog. "These overshot expectations yet again, a fact that should refocus minds on UK fiscal sustainability risks, especially after warnings by the ONS that the 20.7 billion pound figure recorded represents 'the second-highest June borrowing since monthly records began in 1993, after that of June 2020'," analysts at Monex said. "As we have noted previously, this is not a sterling positive dynamic, leaving risks to the pound tilted to the downside ahead of Thursday's PMI release," they said. The borrowing figures added to a sense among investors that finance minister Rachel Reeves may have to raise taxes again later this year to remain on track to meet her targets for fixing the public finances. A separate report on Tuesday showed grocery inflation in Britain rose to 5.2% in the four weeks to July 13, up from 4.7% in last month's report and the highest since January last year, heaping more pressure on UK households. Market researcher Worldpanel by Numerator, which published the report, said just under two-thirds of households say they are "very concerned" about the cost of their groceries, and are switching to supermarket own-label products. The numbers align with data last week that showed nationwide consumer price inflation picked up more than expected in June, also hitting the fastest pace since January 2024. The Bank of England is expected to cut rates by a quarter point next week and at least one more time before the end of the year.
Reuters
3 days ago
- Business
- Reuters
Sterling holds on to gains, investors mull rise in borrowing
LONDON, July 22 (Reuters) - The pound steadied on Tuesday, consolidating after the previous day's rally, as investors took stock of data that showed UK government borrowing soared in June, a reminder of the fragility of Britain's public finances. Sterling , which rose 0.6% on Monday, its biggest one-day gain in a month, was last at $1.3493, showing little change on the day. It was also steady against the euro , which was at 86.7 pence. Britain borrowed more than expected in June as high inflation added to the government's debt costs, according to official data that is likely to add to speculation about the need for fresh tax increases later this year. Public sector net borrowing totalled 20.7 billion pounds ($27.9 billion) last month, the data showed. This compares with a forecast of 17.1 billion pounds for June from the Office for Budget Responsibility, the budget watchdog. "These overshot expectations yet again, a fact that should refocus minds on UK fiscal sustainability risks, especially after warnings by the ONS that the 20.7 billion pound figure recorded represents 'the second-highest June borrowing since monthly records began in 1993, after that of June 2020'," analysts at Monex said. "As we have noted previously, this is not a sterling positive dynamic, leaving risks to the pound tilted to the downside ahead of Thursday's PMI release," they said. The borrowing figures added to a sense among investors that finance minister Rachel Reeves may have to raise taxes again later this year to remain on track to meet her targets for fixing the public finances. A separate report on Tuesday showed grocery inflation in Britain rose to 5.2% in the four weeks to July 13, up from 4.7% in last month's report and the highest since January last year, heaping more pressure on UK households. Market researcher Worldpanel by Numerator, which published the report, said just under two-thirds of households say they are "very concerned" about the cost of their groceries, and are switching to supermarket own-label products. The numbers align with data last week that showed nationwide consumer price inflation picked up more than expected in June, also hitting the fastest pace since January 2024. The Bank of England is expected to cut rates by a quarter point next week and at least one more time before the end of the year.
Daily Mail
3 days ago
- Business
- Daily Mail
Red alert for Reeves as government borrowing hits record high outside Covid in June with £16bn spent on debt interest alone - DOUBLE a year ago - fuelling tax hike fears
' misery was compounded today as government borrowing hit a new record for June outside of Covid. The public sector borrowed £20.7billion last month, far higher than the £17.6billion analysts had pencilled in. The level was £6.6billion higher than a year earlier and only behind the height of the pandemic in 2020 since comparable figures began in 1997. Alarmingly for the Chancellor, the surge was driven by debt interest as well as higher spending. Servicing debt cost £16.4billion over the month, more than double the number for the previous June. Borrowing for the first three months of the financial year to date stood at £57.8billion, £7.5billion more than the same three-month period in 2024. Ms Reeves is desperately hunting for options to increase taxes as she faces an estimated £30billion black hole in the public finances at the Autumn Budget Ms Reeves is desperately hunting for options to increase taxes as she faces an estimated £30billion black hole in the public finances at the Autumn Budget. The tax burden is already set to hit a new high as a proportion of GDP after the last Budget imposed a £41billion increase - the biggest on record for a single package. Labour has ruled out increasing income tax, employee national insurance or VAT. Many believe the Chancellor will opt to extend the long-running freeze on tax thresholds. The policy, in place since 2022, is due to end in 2028-29. By that point it will have dragged an extra 4.2million people into the tax system as wages rise. Ms Reeves has been carefully avoiding ruling out a 'wealth tax' - with backbenchers pushing for 2 per cent levy on assets worth more than £10million. However, she is thought to be privately opposed to the move, with tax experts and Cabinet ministers warning it would only drive away more wealth people from Britain. A raid on pensions is still said to be on the table, with fears that the Treasury is again looking at slashing reliefs. Currently higher-rate earners are spared 40 per cent tax on money that is put into retirement funds. However, reducing the relief to the 20 per cent basic rate could raise around £15billion for the government. The idea was rejected at the Budget last year, but Ms Reeves' situation has dramatically worsened. Chief Secretary to the Treasury Darren Jones said: 'We are committed to tough fiscal rules, so we do not borrow for day-to-day spending and get debt down as a share of our economy. 'This commitment to economic stability means we can get on with investing in Britain's renewal, including fixing our NHS, strengthening our national defence and building hundreds of thousands of affordable homes through our plan for change.' But shadow chancellor Mel Stride said: 'Rachel Reeves is spending money she doesn't have. 'Debt interest already costs taxpayers £100billion a year – almost double the defence budget – and it's forecast to rise to £130 billion on Labour's watch. 'Labour's jobs tax and reckless borrowing is killing growth and fuelling inflation – paving the way for more tax hikes and more borrowing in the autumn. Make no mistake – working families will pay the price for Labour's failure and costly U-turns. 'Only the Conservatives, under new leadership, will break this cycle. Only the Conservatives believe in sound money and low taxes.'
The Guardian
4 days ago
- Business
- The Guardian
UK borrowing rises more than expected, putting pressure on Rachel Reeves
The UK government borrowed more than expected in June amid pressure on the chancellor, Rachel Reeves, to repair the public finances. Figures from the Office for National Statistics (ONS) show public sector net borrowing rose to £20.7bn. This was £6.6bn higher than the same month a year earlier and the second-highest June borrowing figure since monthly records began in 1993. City economists had forecast borrowing to increase to £16.5bn. It comes as Reeves prepares for a tough autumn budget amid mounting speculation over the need for large tax rises to cover a multibillion-pound shortfall in the public finances after the government's high-stakes welfare U-turn earlier this month. Ministers have warned of 'financial consequences' after the backtracking on disability benefits and winter fuel payments for pensioners, which will cost more than £6bn. Alongside a sluggish economic outlook and possible downgrade in productivity forecasts from the Office for Budget Responsibility at the autumn budget, economists have warned Reeves could face a £30bn shortfall against her fiscal rules. The UK economy shrank for two consecutive months in April and May, while unemployment and inflation have risen, as businesses and households come under pressure from tax rises, elevated borrowing costs, and global uncertainty amid Donald Trump's trade war. Reeves has faced growing demands from Labour backbenchers, unions and the former party leader Neil Kinnock to consider introducing a wealth tax. However, the chancellor has so far sought to keep her options open while pushing to reassure business leaders that her priority remains driving up economic growth. The Institute for Fiscal Studies said on Monday there was a 'strong case' for the chancellor to tweak her self-imposed rule, which requires day-to-day spending to be matched by receipts by the fifth year of official forecasts. Sign up to Business Today Get set for the working day – we'll point you to all the business news and analysis you need every morning after newsletter promotion More details soon …
