LONDON (Parliament Politics Magazine) – According to an eminent economist, the chancellor has “wiggle room” to help combat growing living costs.
Before the Spring Statement on Wednesday, Sir Charlie Bean told the BBC that Rishi Sunak might have up to £50 billion “to play with.”
According to new official data, the government has borrowed less than planned so far this year.
It comes as pressure increases on Chancellor Rishi Sunak to act to stem the tide of rising costs.
Increasing pressure on household budgets has prompted calls from politicians and charities for the chancellor to address the issue at the Spring Statement on Wednesday, where he will provide an update on the economy as well as other policy updates.
Mr Sunak, on the other hand, believes that the government’s first objective should be to reduce the amount of money it needs to borrow to cover the gap between what it borrows and what it receives in revenue.
The Office for National Statistics (ONS) reported that government borrowing totaled £138.4 billion in the financial year 2019 in February.
It’s the third-highest total since records began in 1993, albeit it’s still £21.2 billion less than the Office for Budget Responsibility had predicted (OBR).
Sir Charlie Bean, who until December was in charge of economic predictions at the independent forecaster of the government, the Office for Budget Responsibility, told the BBC’s Today programme that soaring inflation and improved tax receipts would give the chancellor more “wiggle room” in Wednesday’s spring statement.
According to the latest numbers, the government collected £53.7 billion in taxes in February, an increase of more than £4 billion over the previous year.
He claimed that Mr Sunak may have between £25 and £50 billion “to play with,” depending on how the Office for Budget Responsibility, an independent forecaster, sees the cost of living changing over the next few years.
“The chancellor will approach the UK’s latest crisis – the tightest income squeeze in centuries, worsened by Russia’s invasion of Ukraine – with the public finances in better shape than projected,” said James Smith, research director at the Resolution Foundation think tank.
The UK government borrowed £5 billion more than planned in February, with higher debt interest costs offsetting the increase in tax revenue.
Despite this, Mr Smith has urged the chancellor to increase tax collections in order to provide emergency income support to families experiencing a cost-of-living crisis.
The Resolution Foundation and Save the Children UK have encouraged the chancellor to consider measures such as boosting welfare payments by at least 7% to keep up with inflation, as well as widening eligibility for the Warm Home Discount for energy expenses.
However, Hoa Duong, an economist at PwC, believes that the mounting constraints brought on by the situation in Ukraine, as well as lower household living costs, could increase the deficit – the difference between what the government earns and what it spends.
“We expect the chancellor to maintain his cautious approach in the Spring Statement, with a focus on balancing the books.” As a result, any financial assistance, such as lowering the cost of living for households, is likely to be limited,” she stated.