Research Briefing | Jan 31, 2022

Fiscal space increases odds of some cost-of-living relief for the UK

United Kingdom | Fiscal space increases odds of some cost of living relief

The lifting of Covid restrictions on January 27 adds to hopes that the worst of the pandemic is in the past and should boost consumer sentiment. But these positives face off against rising inflation and growing cost of living pressures.

What you will learn:

  • Hopes that the worst of the pandemic and fear of incessant lockdowns are now in the past could deliver a boost to sentiment and encourage households to draw down more rapidly the big unplanned savings built up since the spring of 2020.
  • Higher inflation has caused a jump in government debt interest payments.
  • But public borrowing this year should still undershoot the OBR’s forecast, giving the Chancellor fiscal room to aid households in the face of rising fuel bills.
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