Chancellor set for budget headache despite borrowing estimates falling

Government borrowing this year is likely to undershoot current estimates by £30billion, according to forecasts from the Institute for Fiscal Studies (IFS).

But the Chancellor is still facing a headache as he tries to control the towering debt mountain, with longer-term pressures leaving little room for manoeuvre, the think-tank said.

In his March Budget, Rishi Sunak calculated that the UK was set to borrow £234billion in the 2021-2022 financial year to pull through the pandemic. 

But with borrowing falling at a faster rate than expected from the heady heights of last year, the IFS now thinks the total could be more like £203billion.

But the IFS believes that economic damage done by the pandemic, and rising interest payments on the UK’s current £2 trillion debt pile when the Bank of England hikes rates from their record low, could set the country on a tricky course.