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Public finances in view after Hunt’s £55bn of spending cuts and tax hikes

Chancellor Of The Exchequer Jeremy Hunt Presents Autumn Statement
London’s premier FTSE 100 index registered a solid performance last week, adding 0.92 per cent to close at 7,385.52 points, while the domestically-focused mid-cap FTSE 250 index, which is more aligned with the health of the UK economy, dropped 1.2 per cent to 19,283.05 points (Photo by Dan Kitwood/Getty Images)

Traders will be keen to examine fresh public finances figures out this week to get a sense of the UK’s debt pile that pushed chancellor Jeremy Hunt into £55bn of spending cuts and tax hikes last week.

London’s premier FTSE 100 index registered a solid performance last week, adding 0.92 per cent to close at 7,385.52 points, while the domestically-focused mid-cap FTSE 250 index, which is more aligned with the health of the UK economy, dropped 1.2 per cent to 19,283.05 points.

Hunt last week tried to appease financial markets with a series of tax hikes and public spending cuts worth around £55bn to show Britain is intent on repairing its finances.

Income tax bands were frozen for an extra year, along with several other taxes, while real terms spending cuts will kick in after the next election in 2025.

FTSE 100 finished higher last week

The FTSE 100 closed higher last week.
Source: TradingView

The moves have been triggered by a combination of high inflation and low growth cutting the government’s tax revenues and raising debt interest payments.

Analysts said October’s borrowing bill will have topped £25bn due to the government dishing out one off payments to help with high energy bills.

“We expect October to mark a big increase on last year’s print, with energy bills support adding close to GBP 6bn of upward pressure. Higher interest costs too will also add to monthly borrowing,” Sanjay Raja, senior economist at Deutsche Bank, said.

Fresh PMIs out on Wednesday will also be closely watched in the City for signs of whether the UK is already in recession, as forecast by the Office for Budget Responsibility last week.

The consensus forecast is for the services and manufacturing PMIs to have dropped to 48 and 45.8 points respectively in November, putting the surveys firmly below the 50 point growth threshold.

On the corporate side, DIY store B&Q’s owner and FTSE 100 listed Kingfisher publishes a trading update on Thursday. German business confidence is out the same day.

Dave Ramsden, a member of the Bank of England’s monetary policy committee, on Thursday is expected to add to the growing body of dovish rate setters’ remarks, indicating the Bank could slow to a 50 basis point rate rise in December.

England’s men’s football team kick off their Qatar 2022 World Cup campaign against Iran tomorrow at 1pm. They then play USA on Friday at 7pm.