Tackling root cause of inflation 'critical' in Spring Budget

22-Feb-2023 - Last updated on 22-Feb-2023 at 11:10 GMT

Surprise surplus: tackling root causes of inflation 'critical' ahead of Spring Budget (Credit: Getty/Luis Davilla)

Tackling the root causes of inflation in the upcoming Budget is “critical” to enable the sector to return to “driving economic growth” after “surprise surplus” in Government finances.

This comes as the Office For National Statistics (ONS) yesterday (Tuesday 21 February) reported a £5.4bn surplus in public sector net borrowing, £5bn more than previously forecast by the Office for Budget Responsibility (OBR).

UKHospitality chief executive Kate Nicholls said: “The surprise surplus in January is a welcome boost to the nation’s finances and is a sign that we are slowly seeing some uptick in the economy, as also indicated by the slowly decreasing rate of inflation.

“However, we are nowhere near out of the woods and it’s critical the Chancellor tackles the root causes of inflation in the upcoming Budget.

“For hospitality, intervening in the energy market will be crucial to that. Without any action, venues expect bills to increase 82% in April and that will be unsustainable for many.

Swift action

“With swift action next month on energy, business rates and workforce, hospitality businesses can weather this storm and return to driving economic growth and creating job opportunities.”

Self-assessment income tax receipts equated to £21.9bn in January 2023, the highest January figure since monthly records began in 1999 and a third (£5.5bn) greater compared with the same period last year.

However, this was partly offset by substantial spending on energy support schemes and one-off payments relating to historic customs duties owed to the EU, according to ONS.

The data also showed central Government debt stood at £6.7bn in January this year, the highest January figure since records began in 1997, while public sector borrowing hit £116.9bn, which was £7bn more than the same period last year but £30.6bn less than forecast by the OBR.

In addition, public sector net debt at the end of January 2023 was £2,492.1bn, or around 98.9% of Gross Domestic Product (GDP), with comparable debt-to-GDP levels last seen in the early 1960s, according to the ONS figures.

Tough choices

The data from ONS also showed central Government net cash requirement (excluding UK Asset Resolution Ltd and Network Rail) was in surplus by £20.9bn, bringing the total net cash requirement for the financial year-to-January 2023 to £79.4bn.

However, despite these figures and repeated calls for further energy support beyond March, Chancellor Jeremy Hunt stated it was “vital” the Government stuck to its “plan” ahead of next month’s Budget.

A statement from the Chancellor said: "We are rightly spending billions now to support households and businesses with the impacts of rising prices - but with debt at the highest level since the 1960s, it is vital we stick to our plan to reduce debt over the medium-term.

"Getting debt down will require some tough choices, but it is crucial to reduce the amount spent on debt interest so we can protect our public services."