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UK's fiscal hole.


Allies of Chancellor Jeremy Hunt have said he is considering tax rises and spending cuts worth about £55bn a year.

One Treasury official said, «after borrowing hundreds of billions of pounds through Covid-19 and implementing massive energy bill support, we won't be able to fill the fiscal black hole through spending cuts alone».

The issue is the government's decision to spend tens of billions of pounds more on support for household energy bills, putting further pressure on the public finances. Finally,   the most significant contributors to the fiscal hole are «higher interest rates on government borrowing and a slowdown in the expected growth of the economy», which would depress future tax revenues.

The government's existing fiscal rules state that debt as a share of GDP should fall by the third year of the latest OBR forecast and that the current budget should be balanced in the same timeframe. The OBR's job is to «examine and report on the sustainability of the public finances», and it does so primarily by issuing forecasts and comparing these with the fiscal rules. But, first, it sets out the government's targets for future borrowing and debt.

On top of this figure, Hunt is expected to add so-called fiscal headroom of between £10bn and £15bn. This highlights how some budgetary measures may not help fill the fiscal hole. 

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  1. Marshall10 November 2022 at 17:31

    They have to find ways of growing the economy and do it now. Encourage business owners to invest and offer advantages to new entrepreneurs so they actually start new businesses now. These kinds of measures will get us through these tough times and make it better for everyone.

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