Public Sector Net Borrowing Figures Released Ahead of Spring Budget

Word of the Week Wednesday

Techno-Feudalism: Coined by former Greek Finance Minister Yanis Varoufakis,?Techno-feudalism?refers to the?oversized influence and power?wielded by major tech companies such as?Google, Facebook, Apple, Amazon, and Microsoft.?Drawing parallels with historical feudalism, where nobility granted land and favours to peasants, techno-feudalism highlights how these tech giants control vast digital territories, shaping our preferences and seeking rent for providing platforms (digital land) for us to use in business and leisure.?

Public Sector Net Borrowing Figures Released Ahead of Spring Budget

This morning, data from the ONS indicated that public sector net borrowing, excluding public sector banks, was in surplus of ￡16.7bn, marking the largest surplus since records began in 1993. Of course, the month of January brings about surpluses given it’s the month the Treasury collects tax receipts from Self-Assessments. This came as growth in receipts from Corporation Tax, Income Tax, and National Insurance Contributions rose 3.4% just shy of ￡119bn. Public sector spending also fell by 4.8% with considerable reductions coming from the fall in interest repayments on the government’s debt.

Nevertheless, the size of the surplus missed expectations where the general market consensus pointed to a figure of some ￡18bn.

These will of course be the latest monthly net borrowing figures before Hunt delivers his Spring Budget on 6th March. Hunt’s latest budget comes as the UK entered a technical recession, following two consecutive contractionary prints in Q3 and Q4 2023. Such figures led to speculation that the Chancellor Jeremy Hunt will drop his plans to cut income tax by 2p.

Nevertheless, according to some sources the chancellor will benefit from ￡23bn of fiscal headroom so may be willing to announce some pre-election tax breaks. It’s worth considering however how all of this comes under the backdrop of debt-to-gdp still standing in excess of 97.1%, well above the long-term average of 70% since 1948.

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Ceasefire Talks

This afternoon the House of Commons will vote on whether to call for a ceasefire in Gaza. This comes after the SNP proposed a motion to call for an immediate ceasefire in Gaza which the Labour Party yesterday then tabled an amendment to which uses the terminology "immediate humanitarian ceasefire". Commenting on the differences between the SNP’s motion and Labour’s amendments, Lisa Nandy told ITV that “there are significant differences between our proposition and the SNP’s. We are clear that any ceasefire by definition must be two-sided, that Israel can’t be expected to lay down its weapons if Hamas doesn’t observe the terms of that ceasefire.”

The government have also tabled an amendment which calls for a “immediate humanitarian pause” and given convention it is likely that the vote in the Commons will use the Government’s wording.

Staying with the topic of a ceasefire, yesterday we looked at how the US was considering proposing a UN Security Council Resolution which would call for a temporary ceasefire in Gaza and call for Israel to halt its plans for an offensive in Rafah.

Yesterday however, the US vetoed a resolution brought to the UN Security Council from Algeria which called for an immediate ceasefire in Gaza. The US instead favours a “temporary ceasefire” with any resolution being linked to the release of Israeli hostages being held by Hamas.

FOMC Minutes Released Today

At 1900 this evening, attention will be focused on the release of the latest FOMC minutes from their policy meeting on 31 January. Here, the Federal Reserve met market expectations in maintaining their benchmark policy target rate of 5.25-5.5% - its highest level in 22 years. This marked the fourth consecutive hold as inflation remained above target in December at 3.4% (before falling to 3.1% in January).

The release of the minutes comes as markets look for guidance over the future path of the Fed and the extent to which they will cut rates this year. Presently markets are pricing in less than a 105 chance that the Federal Reserve will cut at their next policy meeting on 20 March.