UK economy warning: Expert says British finances ‘increasingly exposed’ to global chaos
Rishi Sunak slammed by Halligan for debt to Bank of England
When you subscribe we will use the information you provide to send you these newsletters. Sometimes they’ll include recommendations for other related newsletters or services we offer. Our Privacy Notice explains more about how we use your data, and your rights. You can unsubscribe at any time.
A UK Government fiscal watchdog has argued that the UK may not be able to “inflate away” the debt it currently owes because of rising interest rates. Richard Hughes, the Office for Budget Responsibility chief, said Government revenue was forecast to suffer due to the coronavirus crisis and the consequences of the global financial crisis of 2008. He warned these calamities would add an additional 20 percent to the UK’s debt to GDP ratio.
Mr Hughes, who was speaking to the BBC on Tuesday, said that the UK might not be able to reduce the value of what it owes via inflation.
He said: “It used to be the case that countries could inflate their debt away.
“However, that is now less and less the case.
“We’ve got a shorter average maturity rate.
“Currently, more of our debt is directly linked to inflation.
“This means that interest goes up automatically with a rise in inflation.”
The UK currently owes a staggering £2.2 trillion in debt.
In 2019, the amount of national debt owed by the UK Government to international gilt holders was found to be 85.4 percent of the nation’s GDP.
However, current data says the UK’s debt to GDP ratio is 97.4 percent.
The nation’s debt to GDP ratio is above that of Zambia, which is 96 percent, but below that of France which is 116 percent.
Mr Hughes said that the Government’s triple lock on pensions was a particular fiscal risk to the UK’s public finances.
The Bank of England predicts that earnings growth could be as high as 8 percent this year and that this would see an increase in the state pension.
Pfizer vaccine side effects: Symptoms to get checked out immediately [INSIGHT]
Hancock scandal proves nobody can live by the rules, says KATE ANDREWS [COMMENT]
Delta variant out of control – Covid map shows UK cases spike [GRAPHICS]
Mr Hughes said that this could cost the UK Government an additional £3bn a year.
With the Government struggling to bring day-to-day spending down and the consequences of the prolonged coronavirus furlough scheme, the risk that the UK’s debt to GDP ratio will increase.
Mr Hughes said that the additional pressure from the coronavirus pandemic could tally an extra £10bn a year.
Mr Hughes warned that these “are pressures that need to be addressed”.
Source: Read Full Article