KPMG comments on public sector finances data - Aug 2022

“Tough choices ahead for the incoming Chancellor” says Michal Stelmach, senior economist at KPMG UK.

“Tough choices ahead for the incoming Chancellor” says Michal Stelmach, senior economist

“Public sector net borrowing continued to overshoot expectations in July, with year-to-date outturn now coming in £3 billion higher than the OBR’s forecast for the first four months.

“The balance of risks to public finances has clearly shifted to the downside. The cost of living crisis will likely require further support to households, while a slowing economy will put downward pressure on receipts, making the fiscal targets ever less achievable.

“The size and form of potential fiscal support remains uncertain. Based on current expectations for gas prices, we estimate the required additional support in the region of £11 billion. That would come on top of the £15 billion announced in May and bring the debt-to-GDP ratio very close to 100%.

“The pressure on spending will persist beyond this fiscal year due to a more inflationary environment. Aside from higher debt interest payments, a reinstatement of the triple lock guarantee will likely see basic state pensions uprated by around £12 billion next year based on our forecast for September’s CPI inflation.”


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