ALEX BRUMMER: Rishi can’t afford to start dishing out the goodies

The Government’s borrowing requirement is the difference between two very big numbers. That is what the Treasury raises in taxes and Whitehall spends.

As the economy roars back to life, revenues are surging and the Government collected £62.2billion of receipts in June, up £9.5billion on the same month last year. 

Income and corporation tax revenues jumped and VAT receipts were 22 per cent higher than a year ago as consumers went shopping.

Chancellor Rishi Sunak is looking at ways to save money. After the cut in overseas aid, the triple lock for the state pension could be in danger

Central government spending was £2.5billion higher than last June. But it fell £24.1billion over the first quarter and remains £5.5billion below the Office for Budget Responsibility (OBR) forecast.

A combination of a more robust economy than expected, and shrinking Covid and other spending, suggests that the OBR may have been too cautious in its March Budget projections. 

There may be a case for revising up its medium-term growth forecast in the autumn.

The improvement can flatter to deceive. The national debt crept up to 99.7 per cent of the economy’s total output in June and the cost of servicing that debt is climbing.

Rishi Sunak cannot afford to pocket the unexpected gains and start dishing out the goodies. 

To the contrary, the Chancellor is looking at ways to save money. After the cut in overseas aid, the triple lock for the state pension could be in danger.

There remains the possibility of a 1 per cent increase in National Insurance to fund the backlog at the NHS and fix social care costs.

The fly in the ointment is the cost of borrowing. The rise in the retail prices index has raised the bill for servicing inflation-linked bonds. 

The Bank of England’s bond-buying programme helped the Government to expand the fiscal envelope in the pandemic. 

Fund raising in the age of Covid has shortened debt maturities so invoices are arriving more quickly. 

Money printing has also made the stock of debt much more sensitive to even small changes in market interest rates. 

The OBR points out that in June alone, the debt interest bill climbed to £8.7billion, which is the highest monthly payment on record stretching back to 1998.

Labour’s then chancellor Gordon Brown used to boast (before the financial crisis hit) that by bringing the budget close to balance, he was saving the taxpayer billions of pounds in interest charges.

One fears that the changed profile of public debt means that Sunak has little chance of repeating the trick.

Many lobbyists with their hands out, such as welfare groups seeking to make the temporary £20 increase in Universal Credit permanent, could be knocked back.

Bridge building

After the setback for Deliveroo in London and Soho House-owner Membership Collective Group in New York, the bright reception for Bridgepoint on the London Stock Exchange will come as a relief.

This paper is critical of those private equity firms which load companies up with debt and slash and burn behind closed doors. 

It would be good to think that Bridgepoint is different, preferring to develop and invest in business rather than defenestrate.

It operates at a different level to titans such as Blackstone, KKR and Fortress and hopefully the float – which placed a value of £3.6billion on the company founded by William Jackson – will provide greater openness. 

Nevertheless, one cannot but think that it missed an opportunity to tap into a new community of retail investors by failing to reach out directly to customers at Itsu, Burger King UK and elsewhere.

The initial public offering is a plus for London, and if it encourages other private equity groups to jump into a nascent investment sector, where public disclosure is the key, all the better.

The deal offers Jackson and colleagues the chance to realise some cash and unlocks a tidy war chest.

It will be fascinating to see if the good-guys rhetoric matches the actions.

Sinking sun

Pity the 60 Japanese firms that have piled £2.4billion into the ghostly Tokyo Olympics. Toyota has pulled its local commercials. 

Among the other backers is booze giant Asahi, but the stadium bars will be empty and pubs are under an 8pm curfew.

As for sportswear brand Asics, hoping to challenge Nike and Adidas, sponsorship is unlikely to deliver any gold. 

A sporting miracle may be needed to overcome Covid cases in the athletes village and dissonance among the public and on the Nikkei.