UK's public debt expected to reach 2 trillion euros
by Anadolu Agency
LONDONNov 26, 2016 - 12:00 am GMT+3
by Anadolu Agency
Nov 26, 2016 12:00 am
The public debt of the U.K. is expected to reach 2 trillion euros by 2021, due to slowing economic growth, declining tax revenues and fewer investments, attributable to the country's secession from the EU and Brexit referendum on June 23 which triggered major shifts in the country's economy.
Amid growing uncertainties, the U.K.'s slowing economic growth and falling tax revenues have reduced Treasury revenues and increased the need for long-term investment borrowing. The country's public debt ratio, which currently sits at 84.2 percent, is expected to reach a record high of 90.2 percent from 2017 to 2018.
These developments have deemed the budgetary policies of U.K. former Chancellor of the Exchequer George Osborne null and void; with his successor Philip Hammond saying that the government no longer carries an objective of running a budget surplus in 2021. Former Chancellor Osborne had implemented the controversial austerity measures during his 2010-2016 term in office which, according to Hammond, are no longer parliamentary objectives, adding that the task of reducing the budget deficit had been left to the next parliament.
The recent announcement of the U.K.'s fall budget on Nov. 23 indicated that the public debt will skyrocket by 220 billion euros and is expected to reach a total of 1.945 trillion euros by the end of 2021.
‘We truly have
too much debt'
Speaking to Anadolu Agency (AA), British Economy Secretary to the Treasury Simon Kirby stated that conditions in the country changed after the decision to withdraw from the EU, adding that the public debt might reach nearly 2 trillion euros by 2021.
Emphasizing that the U.K. economy is expected to decelerate next year, Kirby noted that negotiations with European partners are ongoing despite this period of uncertainty. Kirby asserted that the economic predictions set forth by the Office for Budget Responsibility (OBR) reflect this uncertainty, concluding that the U.K. economy is expected to slow down closer to the 1.4 level in 2017.
Kirby highlighted that it is crucial for the
U.K. to continue infrastructural investments and production in the current period of uncertainty while stressing the country's excessive debt. "We estimate our public debt ratio to increase to 87.3 percent from 2016 to 2017," he said.
might not be over'
Speaking about speculations that the austerity period is over in the U.K., Kirby expressed that he is unsure as to whether or not the period has ended. Referring to the post-Brexit economic period, Kirby said budget planners are "living by the country's conditions," asserting that they are maintaining budgetary plans which were made in 2015. He asserted that the fiscal cycle has been the only mechanism to undergo structural changes while stressing that these changes aim to reduce the budget deficit over the long-term amid the current uncertainties.
Paul Johnson, the director of the Institute for Fiscal Studies, pointed to Hammond's implementation of "new, more flexible financial rules," saying that he prefers neither the tightening of fiscal policy nor the reimplementation of old expenditure plans.
According to Johnson, Chancellor Hammond expanded the budget by about 10 billion euros a year while increasing planned capital expenditures. Compared to the spring budget which was announced in March - prior to Brexit - the U.K.'s fall budget, which was announced on Nov. 23, includes comprehensive changes by way of new budget regulations, especially in terms of public borrowing.
The U.K.'s public debt is expected to increase by an additional 19 billion euros at the end of this year. According to official projections, the slowdown of economic growth will cause the public debt to skyrocket by 86 billion euros during the 2016-2017 fiscal year, 163 billion euros in the subsequent period and 189 billion euros from 2018 to 2019.