ALEX BRUMMER: Rishi can’t afford to hand out all the goodies

The government’s borrowing requirement is the difference between two very large numbers. That’s what the Treasury collects in taxes and what Whitehall spends.

As the economy comes back to life, revenues are rising and the government collected £62.2bn in receipts in June, up £9.5bn from the same month last year.

Income and corporate tax revenues rose and VAT receipts were 22 percent higher than a year ago when consumers went shopping.

Chancellor Rishi Sunak is looking for ways to save money. After the cut in foreign aid, the triple lock of the state pension could be jeopardized

Central government spending was £2.5bn higher than in June last year. But it fell £24.1 billion in the first quarter and remains £5.5 billion below the Office for Budget Responsibility (OBR) forecast.

A combination of a more robust economy than expected and shrinking Covid and other spending suggests that the OBR may have been too cautious in its March budget forecast.

There may be reason to review the medium-term growth forecast in the autumn.

The improvement can be flattering to deceive. Government debt rose to 99.7 percent of the economy’s total output in June and the cost of paying off that debt is rising.

Rishi Sunak cannot afford to pocket the unexpected profits and hand out the goodies.

Rather, the chancellor is looking for ways to save money. After the cut in foreign aid, the triple lockdown of the state pension could be jeopardized.

There remains the possibility of a 1 percent increase in National Insurance to cover the backlog with the NHS and solve social care costs.

The fly in the ointment is the cost of borrowing. The rise in the retail price index has pushed inflation-linked bond redemption bills higher.

The Bank of England’s bond-buying program has helped the government expand its budgetary envelope during the pandemic.

Fundraising in the era of Covid has shortened debt maturities so bills come in faster.

Printing money has also made the debt stock much more sensitive to even small changes in market interest rates.

The OBR points out that in June alone, the debt interest bill climbed to £8.7 billion, which is the highest-ever monthly payment dating back to 1998.

The then Chancellor of Labour, Gordon Brown, boasted (before the financial crisis hit) that he saved taxpayers billions of pounds in interest charges by nearly balancing the budget.

It is feared that the changed profile of government debt means that Sunak has little chance of repeating the trick.

Many lobbyists who roll up their sleeves, such as welfare organizations seeking to make the temporary £20 increase in Universal Credit permanent, could be hit back.

Building bridges

After the setback for Deliveroo in London and Soho House owner Membership Collective Group in New York, the glowing reception for Bridgepoint on the London Stock Exchange will come as a breath of fresh air.

This document is critical of those private equity firms that saddle companies with debt and burn them behind closed doors.

It would be good to think that Bridgepoint is different and would rather develop and invest in business than defenestrate.

It operates on a different level from titans like Blackstone, KKR and Fortress and hopefully the float – which has given a value of £3.6bn to the William Jackson-founded company – will bring more openness.

Nevertheless, one cannot help but think that it has missed an opportunity to tap into a new community of retail investors by failing to engage directly with clients of Itsu, Burger King UK and elsewhere.

The IPO is a plus for London, and if it encourages other private equity groups to jump into a burgeoning investment sector where disclosure is key, all the better.

The deal offers Jackson and colleagues a chance to earn some cash and unlocks a neat war chest.

It will be fascinating to see if the good guys’ rhetoric matches the actions.

sinking sun

Pity the 60 Japanese companies that pumped £2.4 billion into the haunted Tokyo Olympics. Toyota has withdrawn its local commercials.

Among the other backers is liquor giant Asahi, but stadium bars will be empty and pubs under a 8pm curfew.

As for sportswear brand Asics, hoping to challenge Nike and Adidas, sponsorship probably won’t bring gold.

A sporting miracle may be needed to overcome Covid cases in the athletes village and dissonance among the public and on the Nikkei.

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