Rishi Sunak, Chancellor of the Exchequer is expected to introduce much-improved visions for the public finances in his spring statement next Wednesday, adding to pressure on the chancellor to support Britons cope with the growing cost-of-living hardships. Very powerful tax revenue growth in the financial year ending in March has already put public borrowing on course to be quite lower than the Office for Budget Responsibility foretold at Sunak’s Budget last October.
The UK fiscal watchdog said the government would borrow £183bn in 2021-22. But the government is now on course to borrow only approximately £160bn interpreting much better than anticipated tax receipts. Tory MPs are putting forth maximum pressure on Sunak to follow other European countries including France, Ireland, and the Netherlands by reducing fuel duty, as rocketing petrol and diesel prices slam households and small businesses.
Sunak told Tory MPs on Monday night that crude prices had declined 20 per cent in a week, which would have more impact than anything else on fuel prices, but his allies refused to comment on the probability of a tax cut. Treasury officials have in recent weeks been evaluating more far-reaching ways of assisting households, including lifting limits for payment of income tax or national insurance contributions.
“Rishi is desperate to cut taxes,” said one person briefed on the Treasury’s contemplations. However, the chancellor has also told colleagues he wants to wait until autumn before making big decisions on the cost-of-living issue because of the volatility of world markets. Those who observe the public finances closely expect the OBR to predict next week that the good news on tax revenues will persist, allowing the chancellor to declare that he has firepower.
In the October Budget, the OBR’s predictions showed Sunak was on course to have a £25bn current budget excess in 2024-25. The ball now believes that OBR will predict that surplus to be between £45bn and £75bn, with the range indicating the intense uncertainty over the outlook. The OBR’s new forecasts will take account of the outcomes of sharply soaring oil and gas prices in the first week of Russia’s invasion of Ukraine.
These are expected to push up salaries and inflate the cash size of the economy, known as a nominal gross domestic product, thereby putting up the tax revenue forecast further even though higher energy prices will depress real growth and prosperity. Assistants to the chancellor have admitted the OBR forecasts will be stronger in the spring statement than many commentators have expected.