AJ Bell press comment – 21 September 2022
- Borrowing in August £6.5bn higher than pre-covid levels
- Debt interest payments of £8.2bn the highest for August since monthly records began in 1997
- Debt as a percentage of GDP up 1.9% to 96.6% compared to August 2021
Danni Hewson AJ Bell Financial Analyst comments on Public sector finances figures released today:
“Can the UK afford to borrow more? It is a question that will be mulled over on social media and in news programmes for days to come. But in asking that question you also need to consider this one: can the UK afford not to borrow more?
“Debt levels have soared to 96.6% of GDP, a rather eyewatering jump of 1.9% compared to last year, and debt payments have been seared with the hot torch of inflation. But without additional support many households and businesses simply won’t be able to function.
“Liz Truss has said growth will be the key that restarts the UK’s economic engine, which is widely thought to have stalled leaving the economy merrily sliding downhill for the last couple of months. But growth requires confidence, and the new Chancellor will need to soothe investor’s nerves when he delivers his ‘mini budget’ later this week.
“Speculation that it won’t include an independent health check from the OBR has struck a discordant note. If the government is confident that it has got the right strategy it shouldn’t fear transparency.
“The government needs to outline exactly how it will pay for the extra spend that will be required over the next six to twelve months. It needs to prove to markets that the UK economy is in a position to borrow more money because it has the capacity to move on from this current crisis and thrive.
“Sterling has tumbled again this morning, partly because of the impending rate decision from the US Federal Reserve, which is broadly expected to further bolster the dollar, but partly because markets don’t feel soothed by the numbers they’re seeing.
“Numbers are the bottom line and there are at least some figures in this latest release which do give comfort and reassurance, not least robust tax receipts which will be crucial going forward. How will those receipts be impacted by the anticipated tax cuts? It is another question to be perused and one that only time will be able to answer.”
