“Month two of the new financial year brought little respite for the Chancellor, as rising interest rates and inflation-linked debt drove central government debt interest costs 76% higher than before the pandemic, putting pressure on other areas of public spending. Added to the ongoing costs of the energy price guarantee, the combined deficit for April and May 2023 reached a total of £43bn, £20bn more than in the same period last year and the second highest deficit on record.
“The Chancellor will also be concerned about tax and other receipts as these are rising at a much slower pace than spending, suggesting he may need to borrow a lot more than expected in both this financial year and 2024/25.
“While the level of public spending before interest is expected to improve once the energy price guarantee ends in July, rising interest rates cast a shadow over the public finances. This will worry a government keen on finding sufficient fiscal headroom to be able to deliver pre-election tax cuts.”
Notes to editors:
- Central government interest on debt was £17.2bn¬¬ in the first two months of 2023/24, 76% more than the £9.8bn reported for the equivalent period in 2019/20.
- Total public sector receipts in the first two months of 2023/24 were £160bn, 5% more than £153bn in April and May 2022. Total managed expenditure in April and May 2023 was £203bn, 15% more than the £176bn reported for the equivalent period last year.
CONTACT: ICAEW media office firstname.lastname@example.org or 07970 402 073