The psyche of human beings is such that we often assess our own life conditions by comparing them with those of others. You know, such as however bad you feel right now you're not Russell Brand (heart-warming, isn't it?).
It has been gratifying for a while for us to consider that none of us are Jeremy Hunt (except Jeremy Hunt; but then, at least he has the consolation of realising he isn't Russell Brand). Jeremy has what is known as, "a job on ...". The Institute for Fiscal Studies ('IFS') think-tank, released figures today (Tuesday 17 October) starkly laying out the pressure facing Hunt as he grapples with calls from the right of the Conservative party to push through tax giveaways before the next general election. Sure, because, that would ensure they win it ...
The fact is that surging debt interest payments and sluggish growth have left our Chancellor with little scope for pre-election tax cuts, the latest analysis suggests. These numbers tell us that public borrowing is forecast to reach £112 billion this year, or 4.2 per cent of gross domestic product. The figure is below March predictions but well above its long-run average; and let's be fair, it is £60 billion more than forecast in the 2022 spring Budget, which is, what, almost seven months ago now.
The result of all the above is that the national debt will remain stuck at close to 100 per cent of national income, even with tight public spending settlements and further increases in taxes lying ahead. (Putting this in perspective, let's say that you earn around £40,000, you would be in the same position as the UK if your total debt is around £40,000. You know, credit cards, maybe a loan or two ... your mortgage. If your mortgage was, in itself, around £200,000 your debt is already 500 per cent of your income. So maybe things are not so bad.)
However, Paul Johnson, director of the IFS thinks things really are that bad: “The price of our high levels of indebtedness, failure to stimulate growth, and high borrowing costs is likely to be a protracted period of high taxes and tight spending.” He said this as the UK, like other Governments, is under pressure to show it is gaining control of its outsized public deficits amid flighty bond markets and elevated levels of inflation.
The challenge of the IFS, Jeremy Hunt and others has, it seems, been made harder in Britain by the rising share of public spending being consumed by debt interest payments. Debt interest spending reached 4.4 per cent of national income in the most recent fiscal year. This is compared with an average of 2 per cent over the first two decades of the century. It will stay at or above 3 per cent of GDP over the medium term, £26 billion a year higher than previous levels, the IFS said; although failed to say: "Na na na na na na," at the end of that statement.
What's next? Even if the Bank of England cuts interest rates more sharply than expected, as predicted by analysts, public spending on debt interest would remain higher than predictions made as recently as the March 2022 Budget.
So, we have absolutely no idea what is next.