Will inflation kill Truss’s tax cut plans?

This week, the Institute for Fiscal Studies offered tough words for those hoping for tax cuts: with inflation taking its toll on both government and household finances, the next prime minister would be forced to prioritise the most vulnerable and debt-servicing payments. This would require more revenue for the Treasury, not less. As the Office for National Statistics publishes the latest public sector finance data for July, are these warnings too pessimistic – or already proving apt?

Inflation continues to ramp up debt interest payments – a grim reality for any government which wants to spend money on delivering new and better services, not on money it’s already spent. Last month saw debt-servicing payments nearly double from the year before: central government debt interest payable was £5.8 billion, up £2.3 billion from July last year. But there was a notable drop from the previous month, when debt-servicing payments jumped to a record high in June, hitting nearly £20 billion.