Sky's Ian King writes that the two big drags on the public finances currently are on course to ease significantly but warns that the chancellor has limited room to manoeuvre.
The cost of living crisis is on course to ease, bringing down the cost of energy support and servicing government debtAt first blush, the public sector net borrowing figures for December are pretty depressing.
Interest payments on the national debt during the month came in at £17.3bn, the second highest on record, reflecting the fact that interest payments on around a quarter of the national debt are linked to the rate of inflation.The Office for National Statistics noted that, of that £17.3bn, some £13.7bn reflected the impact of inflation on index-linked goods.
Those frozen thresholds also apply to other taxes. For example, the government is raking in ever-larger sums from Inheritance Tax, the 'nil band' threshold for which has stayed the same since 2010-11 and which, like the main residence nil rate, has been frozen until 2026. "Rampant inflation and years of frozen allowances and soaring house prices mean many more families will find themselves hit with a hefty inheritance tax bill which they might not have envisaged or planned for."
That decline in inflation will bring down sharply the inflation-linked element of interest payments on the national debt.
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