KPMG comments on public sector finances data - Dec 2021

Despite an improvement in borrowing, rising interest rates could turn fiscal targets into an elusive dream says Michal Stelmach, senior economist at KPMG UK:

“Government borrowing fell to £17.4bn in November, down by £4.9bn on a year ago. This reflected a continuation of economic recovery from the pandemic, with VAT receipts up by 16%, PAYE income tax up by 13%, and non-interest spending down by 8% on a fiscal year-to-date basis.

“However, inflation continued to dictate debt interest spending, with payments recording £4.5bn. We project debt interest payments to total £64bn in 2021-22, up from £39bn in 2020-21.

“Unlike during previous recoveries, monetary policy will have large fiscal implications as the Bank prepares to withdraw its stimulus. Around a half of total public debt is linked to either inflation or the Bank of England’s interest rate via QE, both of which will put further upward pressure on servicing costs next year. Taken together, with three further rate hikes that we expect by the end of 2022-23, they could add as much as £11bn to borrowing that year, eating up over a half of the Chancellor’s current fiscal headroom.”



For media enquiries, please contact:     

Zoe Sheppard, Head of Media Relations

Mob:         +44 (0)7770 737 994  



KPMG Press Office  

Tel:  +44 (0) 207 694 8773  

Follow us on twitter: @kpmguk  


Notes to Editors:  

About KPMG in the UK

KPMG LLP, a UK limited liability partnership, operates from 21 offices across the UK with approximately 16,000 partners and staff.  The UK firm recorded a revenue of £2.3 billion in the year ended 30 September 2020. KPMG is a global organisation of independent professional services firms providing Audit, Legal, Tax and Advisory services. It operates in 147 countries and territories and has more than 219,000 people working in member firms around the world. Each KPMG firm is a legally distinct and separate entity and describes itself as such. KPMG International Limited is a private English company limited by guarantee. KPMG International Limited and its related entities do not provide services to clients.

Connect with us

Save, Curate and Share

Save what resonates, curate a library of information, and share content with your network of contacts.