“The bleak mood inside HM Treasury will not have been aided by the fiscal results for the first quarter of the 2023/24 financial year, following the confirmation last week by the Office for Budget Responsibility that the public finances are on an unsustainable path. The prospect is for significant tax rises over the next fifty years to keep public debt under control.
“The deficit of £54bn for the first three months is the third highest on record with tax and other receipts failing to keep pace with public spending. Higher benefit payments, energy support schemes, employee salaries and procurement costs were the main drivers of the £12bn increase in the deficit compared with the first quarter of the previous financial year, although the energy price guarantee coming to an end in June will benefit future quarters.
“Even though interest on index-linked debt has started to moderate as inflation slows, it looks increasingly likely than any tax cuts announced before the next general election will need to be offset by even larger tax rises afterwards, a very difficult tightrope to walk if credibility in the UK’s public finances is to be maintained.”
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