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Public finances bleak as economy stalls, ICAEW says

Author: ICAEW

Published: 21 Sep 2022

Responding to the public sector finance numbers released by the Office for National Statistics today (Wednesday 21 September 2022), Alison Ring OBE FCA, Public Sector and Taxation Director for ICAEW, said:

“The deficit in August was higher than expected as debt interest costs continue to rise, painting a bleak picture for the country’s public finances as the economy stalls.

“Today’s numbers do not reflect the Prime Minister's energy market intervention, which will add tens of billions of pounds to borrowing in the second half of the financial year, even before any tax cuts that may be announced. Worryingly, net debt is now expected to exceed an eye-watering £2.5trn by the end of the year, compared with £1.8trn in March 2020. This makes the public finances even more vulnerable to future economic shocks and may put off by several years the point at which the debt to GDP ratio starts to fall.

“With the pound under pressure, Chancellor Kwasi Kwarteng will be hoping that debt investors respond positively to his plans to borrow more to slash taxes, support households and businesses through the energy crisis, and increase defence spending. A negative reaction could see the Bank of England raise interest rates by even more than anticipated tomorrow, adding to the nation’s fiscal woes and limiting the scope for further action over the next couple of years.”


Notes to editors:

The latest public sector finance numbers can be found here.