The UK Chancellor has expressed concern at the IMF summit in Marrakech that he faces tough decisions ahead of his Autumn Statement.
He stated that the UK may see some increase in defence expenditure if there is an intensification of the conflict in the Middle East.
Mr Hunt said that the UK public finances were “worse than in the Spring of 2023” and that with the darker global outlook UK debt interest payments could jump by as much as £30bn on top of the existing £100bn plus figure annually; which does not include any repayment of the debt.
The difficult decisions include balancing matters and taking into account the situation in Ukraine and Israel.
I have been expressing concern about UK debt for some time. UK debt is high and we will have to have a period of balancing public expenditure with potential savings or tax increases; or a combination of those.
The situation is mirrored in the US where huge debt levels have become unsustainable and it is one reason why some members of Congress have been opposed to further expenditure on Ukraine.
In UK, where there may be an election as early as May or June 2024, the opposition Labour Party who may form an administration post election, have committed to an increase in defence expenditure of £2bn – not that this buys a great deal – and an increase in borrowing of some £28bn. However, whomever forms the next government will have a tough task. There is a very real prospect that in defence quite a number of ‘capital projects’ in procurement may have to be mothballed and defence is only one area where savings may have to be made in order to balance the books, prevent debt getting out of hand and most importantly preventing inflation ‘letting-rip’.
In a sobering thought, Mr Hunt said in Marrakech on the side lines of the IMF summit, “we will do everything we possibly can to prevent taxes rising”. It is a bleak outlook.