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Jeremy Hunt’s debt reduction plan ‘a very big fiscal risk’, says OBR

Jeremy Hunt’s debt reduction plan ‘a very big fiscal risk’, says OBR

Jeremy Hunt’s debt reduction plan ‘a very big fiscal risk’, says OBR
Nov 28, 2023 50 secs

Government plans to reduce the UK’s debt mountain by restricting Whitehall spending are among the biggest risks to the outlook for the public finances, according to the Treasury’s independent forecaster.

The director of the Institute for Fiscal Studies, Paul Johnson, told MPs that cutting debt may not be possible unless the chancellor increased fuel duty.

The Treasury committee chair, Harriett Baldwin, said she was concerned that the UK’s debt level would increase despite efforts to restrict spending.

Hughes responded that the Treasury’s reliance on short-term loans by the Bank of England via its quantitative easing (QE) programme and inflation-linked bonds had dramatically increased the cost of borrowing over the last 18 months.

Hughes said a one percentage point increase in interest rates beyond its forecast in March added £15bn a year to government debt payments and sent the annual cost above £100bn.

Index-linked bonds, which account for more than a quarter of government borrowing, have risen sharply in line with the retail prices index (RPI).

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