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MNI BRIEF: IFS Sees UK Budget Balance Out Of Sight

(MNI) London
(MNI) London

The UK government looks to be charting a path that makes achieving a balanced budget within the next three years unrealistic, with current year borrowing set to be the third highest in the post-war period, according to the Institute for Fiscal Studies.

The Treasury's fiscal rules, only brought into law in January 2022, committed it to getting the current budget at least in balance by the third year of the forecast. The IFS, looking at the mix of proposed measures the government is set to unveil a fresh fiscal package Friday, including energy price caps and a reversal of tax increases, projected that the current budget would be in deficit to the tune of GBP25 billion in the 2025-26 fiscal year.

While the cost of the energy price cap is highly uncertain, as it it depends on wholesale energy prices, the IFS estimated that borrowing could rise to "as high as 9.1% of national income this financial year – to well over £200 billion – and to 6.1% in the (fiscal) year beginning next April," with the tax cuts resulting in a persistent reduction in the tax take.

The UK Debt Management Office is set to unveil its new borrowing remit on Friday, with the scale of government borrowing likely to pressure Gilts in coming months, particulalrly with the Bank of England set to start its quantitative tightening in coming weeks. The BOE's latest policy decision is due later Thursday.

MNI London Bureau | +44 203-586-2223 |
MNI London Bureau | +44 203-586-2223 |

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