“Government borrowing is continuing to come in below the OBR’s pessimistic forecasts, helped by stronger economic growth. This relative improvement may only be temporary and fiscal discipline is therefore as important as ever.
“However, there is no immediate need for further austerity of any kind – whether in the form of deep spending cuts or tax increases – to repair the damage done by Covid.
“Interest payments on central government debt jumped to £8.7 billion in June, largely due to the impact of rising inflation on the cost of index-linked gilts.
“The pick-up in inflation partly reflects the strength of the economic recovery and this could still be positive for the public finances overall.
“Nevertheless, rising interest rates are one of the downsides of higher inflation – and another reason for the Bank of England to end its policy of quantitative easing.”
Notes to editors
Contact: Emily Carver, Head of Media, 07715942731
IEA spokespeople are available for interview and further comment.