The Chancellor is under pressure to cut taxes but he fears the increased cost of servicing government debt will make it harder to meet his fiscal targets
Public finances data for July proved to be better than previously expected, with the state borrowing a total of £4.3bn thanks to surprisingly strong tax receipts.
So far this fiscal year the Government has borrowed £56.6bn, a significant increase on last year but £11.3bn less than the Office for Budget Responsibility forecasts on which the Treasury bases its tax and spending policy. The Treasury is understood to have ruled out tax cuts for as long as inflation remains unacceptably high, on the grounds that pumping more demand into the economy would increase the rate of price rises.
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