Higher borrowing costs for the government can mean tax increases or spending reductions if it wants to stick to its own self-imposed rules, warned a leading economic reflection group.
According to a report by the Resolution Foundation, the government depicts 7 billion pounds sterling per year more paying interest on its debt than at the time of the budget.
Consequently, the reflection group said that higher taxes or reductions “may be necessary” if the government wants to keep its promise not to spend more every day that it does not engage in taxes.
A Treasury spokesman told the BBC that his commitment to his tax rules was “non-negotiable”.
The report comes after Chancellor Rachel Reeves revealed her plan to stimulate the economy by supporting a series of infrastructure projects, including a third track in Heathrow.
The government’s loan costs began to increase after last fall budget.
The Resolution Foundation said that the increase was “mainly motivated by international factors”, the debt of the American and European government also increasing.
Other economists have said that higher borrowing costs are at least partly a reaction to slow growth in the British economy.
The increase was much lower than the sequel to the mini-budget 2022, and the borrowing levels have dropped since it reached its highest levels in several years earlier this month.
However, the resolution foundation said that the government’s risk of breaking its own budgetary rules “remains on an edge of the knife” because the borrowing costs remain higher than in the fall.
The Director of Research of the Resolution Foundation, James Smith, said that Chancellor Rachel Reeves will have to respect budgetary rules “or risk more market contact”.
“While the Chancellor rightly focuses on the overwhelmed of her long -term economic growth strategy, difficult short -term decisions, in particular new tax increases or expense reductions, may also be necessary in the weeks To come to demonstrate his commitment to sustainable public finances, “he added.
The government has already said it wanted to reduce “waste” and said tax increases could be a possibility.
Reeves said that in the December departments, “efficiency savings” of 5% would be asked to identify an examination to establish their budgets for the coming years.
“The chancellor has already shown that difficult decisions on expenses will be made, with the expenditure exam to eliminate in progress waste,” a Treasury spokesman for the BBC told.
Meanwhile, Prime Minister Sir Keir Starmer did not exclude more tax increases when the BBC was asked in December.
“If you look at Covid and Ukraine, everyone knows that there are things that we cannot see now, but I can tell you that our intention was to do difficult things in this budget, not to come back” , he said.
