Lower public borrowing gives Sunaku room to halt the growth of national insurance

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The UK’s public borrowing was £ 12.9 billion lower than official forecasts for the fiscal year to December, leaving Chancellor Rishi Sunak with enough fiscal space to keep the increase in the national insurance tax planned for April.

Net public sector borrowing is estimated at £ 147 billion, almost half of that in the same period last year, data from the Central Bureau of Statistics on Tuesday.

The figure was £ 12.9 billion according to official estimates from the Office of Budget Accountability in October, similar to Increase tax on national insurance by 12 billion pounds planned for spring to fund NHS and welfare.

“Our forecasts imply that the chancellor will have enough fiscal space to cancel the planned increase in national insurance contributions on April 1 to mitigate the blow to households,” said Bethany Beckett, an economist at consulting firm Capital Economics.

“This fiscal room for maneuver makes it inevitable that the Chancellor will set out a plan to address the cost of living crisis,” said James Smith, director of research at the Resolution Foundation’s think tank.

British Prime Minister Boris Johnson is on Monday several times refusedin a television interview, to confirm that the increase in national insurance will start in April.

On Tuesday, a Johnson spokesman, when asked if the NI rise would definitely progress, replied that “there are no plans” to change the schedule for its introduction, instead of simply answering “yes”.

Sunak and Johnson are scheduled to hold talks in the coming days on how to alleviate the cost of living crisis, especially focusing on growing energy bills.

The chancellor’s allies insisted there were “no discussions” about delaying the rise of NI. Sunak is well aware that if the tax increase is delayed, it will be increasingly difficult to introduce it as the next general election approaches.

Traditionally, chancellors prefer to raise taxes early in parliament, using any fiscal space to reduce taxes closer to elections.

Michal Stelmach, senior economist at KPMG UK, pointed out that the UK is one of the few countries in Europe that has not introduced any support measures to protect vulnerable groups from higher prices, after inflation rose to A 30-year high in November.

In December, UK borrowing was estimated at £ 16.8 billion – £ 7.6 billion less than in December 2020, when most of the country was under severe pandemic limits. Borrowing levels for the month were also below the £ 18.5 billion expected by economists polled by Reuters.

Meanwhile, central government receipts reached £ 68.5 billion last month, up 10 per cent from December 2020, driven by stronger tax receipts as the economy continued its recovery.

Total government spending last month was £ 86.7 billion, down £ 1bn from the same month in 2020, reflecting savings of £ 8.2bn thanks to pandemic job retention and self-employment support programs that ended in October .

However, part of the government savings was offset by higher spending on the NHS Test and Trace program and the cost of the Covid vaccine.

Interest payments more than doubled to £ 8.1 billion compared to December 2020 due to high retail price inflation to which part of government debt is tied.

Sunak said: “Risks to public finances, including inflation, make it even more important to avoid burdening future generations with high debt repayments.”

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