MNI BRIEF: Borrowing Undershoot, No Room For UK Tax Cuts - IFS

UK public sector borrowing is on track to come in around GBP20 billion below the official forecasts in the 2023-24 fiscal year, but borrowing in subsequent years will be a little higher than predicted and there is no room for tax cuts in the UK budget next month, according to the Institute for Fiscal Studies.

In the IFS's Green Budget, produced with economists at Citi, the central borrowing forecast is for GBP112 billion this year compared to the GBP132bn official forecast made in March by the Office for Budget Responsibility. The OBR path in subsequent years was based on a lower market rate path than the present one, Bank Rate now remaining above 4% through forecast horizon, which would add GBP20 bn to forecast debt interest spending by 2026-27.

The fiscal outlook, "really points to there being no scope for any tax cuts any time soon," Carl Emmerson, IFS Deputy Director, said. The Government's fiscal rule stipulates that debt-GDP should be on a declining path in the fifth forecast year and the IFS projections show underlying debt-GDP higher than under the OBR’s March forecast in later years and rising very slightly in 2027-28.