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MNI BRIEF: UK Debt Cost Doubling, Debt/GDP Likely Rising - IFS

(MNI) London

UK debt interest costs are set to be double next year from the level previously assumed by official forecaster the Office for Budget Responsibility and it would require very hefty spending cuts to get the debt/GDP ratio declining, the Institute for Fiscal Studies found in its Green Budget report. The IFS foreshadow the OBR's forecasts, which are set to be published on Oct 31, giving the Bank of England Monetary Policy Committee time to digest them at its November policy meeting,

The IFS forecasts that debt interest payments next year, in the 2023-24 fiscal year, will be GBP102 billion, double the GBP51 billion that the OBR assumed in its March forecast. Borrowing in this fiscal year is expected to come close to GBP200 billion, again double the GBP99 billion assumed by the OBR. If the government's fiscal goal is, as suggested, to get debt/GDP on a declining path five years ahead, then, in the IFS' assessment, based on Citi's macro-forecasts, it would miss this on current plans.

IFS/Citi estimate that GBP62 billion of tightening would be needed in 2026-27 just to stabilize debt and if the health and defence budgets were protected every other departments' budget would have to be cut by 27%.

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

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