Chancellor Rishi Sunak will present plans to put the UK’s public finances on a more sustainable path during next month’s budget, according to reports.
Sunak is expected to set new targets for the government to stop borrowing to fund daily expenses within three years, according to the FINancial Times.
The ratio of outstanding public debt to the size of the economy is expected to start declining by 2024/2025 under the new targets.
On its current trajectory, government spending would fit into the new plan. However, the new goals would give Sunak little wiggle room for gifts during the budget and spending review on October 27.
The reports come as the government has raised national insurance taxes and dividends by 1.25 percentage points in a bid to raise funds to clear the growing backlog of NHS work and tackle the crisis social services.
The plans aim in part to offset the greater exposure of public finances to inflation and rate hikes. In his budget speech in March, Sunak said a one percentage point hike in interest rates would cost the UK more than £ 25 billion.
Inflation recorded its largest monthly percentage point increase last month, rising to 3.2% annually in August, from 2% in July.
Part of the public debt is linked to the retail price index, which means that the public debt rates rise in line with the RPI.
