Hoa Duong, economist at PwC, says
“Today’s data shows a continued improvement in the UK’s public finances. Government borrowing in December 2021 was £0.6bn less than the previous month and net debt was 13% lower than the OBR’s expectation for December 2021.
“However, more radical steps need to be taken if the Chancellor wants to improve the financial outlook by the next Budget review in March. As restriction measures are lifted across the country, Rishi Sunak is under additional pressure to tighten his public finances as justification for continuing government support diminishes, but his task is not without challenges.
"According to today’s data, only around 3% of the Government budget was spent on all subsidies in December 2021, 24% lower than a year ago. So, savings need to come from elsewhere.
“Therefore, all eyes are on National Insurance Contributions. Accounting for 20% of the government receipts in December, increasing National Insurance would potentially be a quick fix. However, it would be a significant extra burden for households as it would exacerbate the current rising cost of living for many.
"Despite this, we anticipate that the question is not if but when National Insurance will rise - with the challenge being to time any increase without further squeezing household budgets and impacting economic growth."
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