The UK budget deficit is lower than forecast, as taxes have begun to rise

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By Andrew Atkinson

(Bloomberg) –

The UK government borrowed less than officials had predicted in the first month of the financial year, but the risk to public finances as a possible remedy for stagflation looms is increasing.

The budget deficit totaled 18.6 billion ($ 23.4 billion) in April, according to official figures released on Tuesday, just below the ফর 19.1 billion forecast by the Office for Budget Responsibility in March.

Deficits have plummeted since the height of the epidemic, while borrowing has hit post-war heights, but rising risks of inflation and recession have cast a shadow over the current fiscal outlook.

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The April figures were influenced by a series of tax changes. These include wage tax increases, energy tariff reductions, value-added tax increases in the hospitality industry, and council tax rebates to help families with rising energy bills.

Total government receipts rose nearly 17% to £ 70.2 billion in April due to the impact of a strong labor market and tax increases. Expenditure decreased by 4.1%, which was reflected in the phased reduction in the cost of epidemiological support programs such as the Farlow and Covid vaccines and tests. The overall budget deficit was just over half of the level a year ago.

Although loan costs in April were lower than the OBR forecast of £ 4.4 billion, they are expected to grow faster over the course of the year. That’s because about a quarter of all government bonds are tied to the retail price index, which reached a 40-year high of 11.1% in April.

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Tax revenues will suffer if the economy falls into recession, and Exchequer Chancellor Rishi Sunak is under pressure to increase spending to help people coping with the crisis of life.

“While we are doing everything we can to help households cope with rising prices, inflation is also increasing our spending on debt interest – which is expected to reach £ 83 billion this year,” Sunak said in a statement following the figures. “We need to adopt a balanced and responsible approach to support people right now, without burdening future generations.”

Debt was cut by £ 7.2 billion to £ 144.6 billion for the fiscal year ended March, still above the B 128 billion forecast by OBR, although that number could drop further with the release of new spending data.

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