MNI BRIEF: UK OBR Figures Show Higher Debt Interest Biting

The detailed figures published by the UK's Office for Budget Responsibility, the official fiscal forecaster, highlight how rising debt interest costs are negating the boost to the public finances from higher than expected tax receipts. The OBR forecast that public sector net borrowing in fiscal year 2022-23 would be GBP99 billion, GBP16 billion higher than in October, with debt interest costs rising to GBP83 billion, double what the OBR predicted in its previous forecast round, as a result of both higher inflation and rising interest rates.

The mix of tax rebates and cuts unveiled by Chancellor of the Exchequer Rishi Sunak amounted to a GBP17.6 bln fiscal injection, which the OBR said would offset half the hit to households from higher energy and fuel costs. The OBR said that by 2024-25 the Treasury would have a margin of GBP27.8 bln against its fiscal goal, to balance the current budget 3 years hence, or some 1% of GDP. The OBR conditioned its forecasts on market assumptions that the Bank of England would raise its policy rate, Bank Rate, to a peak of 1.9 per cent by the third quarter of 2023, far higher than the 0.75% interest rate peak it had in its October forecasts.