Danni Hewson, AJ Bell financial analyst, comments on the latest public sector finances:
“August delivered another month when what the government raked in was far less than it spent and although the numbers are going the right way, borrowing figures overshot expectations. Tax receipts were up almost across the board with dips only in alcohol and tobacco duty and capital gains tax, the latter suggesting business is taking advantage of new incentives.
“One of the big successes and one of the biggest costs has been the government’s furlough scheme which is now in its dying days. Spend on the scheme in August was just over a billion pounds, an almost 70% decrease compared to the same time last year as the jobs market bubbled and unemployment was kept in check.
“All the support, all the restrictions have come with a substantial price tag and whilst the deficit might be lower than official forecasts, and the Chancellor might have a touch more wiggle room going into his autumn budget than had been expected, there are concerns.
“The pace of economic recovery has been slowing and with conversations about rising gas prices potentially requiring some businesses to operate a short week, that pace could grind to an uncomfortable halt.
“Inflation is not just something that’s making us wince when we get to the supermarket checkout, it’s also taking its toll on the public purse. Interest payments on all that debt shot up in August and September will be even more painful when you factor in the latest RPI figures. And the medicine for inflation, a rate rise from the Bank of England which is widely accepted to be on its way, will perversely also add to debt costs.
“We know we’re going to have to pay more. We know health and social care has taken a battering. But what of those unexpected costs that seem to be hurtling towards us this autumn, how will they factor in the Chancellor’s sums?
“The bitter pill of tax hikes are always more palatable when they come sweetened, but with the current climate the Treasury will be struggling to find even wonky carrots within their budget.”
