The Economics Show How big a fiscal hole is the British government in? With Paul Johnson
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Mar 24, 2025 In this discussion, Paul Johnson, Director of the Institute for Fiscal Studies, dives into the UK's pressing fiscal challenges. He analyzes the aftermath of stagnant economic growth and rising borrowing costs faced by the government. As defense spending escalates, he weighs the implications of breaking tax pledges. Johnson critiques the government's growth strategies while assessing the balance between defense needs and welfare commitments. Listeners gain insight into the future of public finances and the necessity for transparent fiscal policies in turbulent times.
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IFS and Government Relations
- Paul Johnson recalls a generally civilized relationship with UK politicians and civil servants.
- One difficult moment was with Liz Truss and Kwasi Kwarteng, who were unhappy with the IFS's assessment of their actions.
UK Fiscal Trouble Rating
- The UK government's fiscal situation is rated a seven or eight out of ten on a scale of trouble.
- High debt, market uncertainty, and struggles to meet fiscal rules contribute to this rating.
Factors Affecting Borrowing
- Increased government spending and lower-than-expected tax revenues are contributing to higher borrowing.
- The UK's economic growth has stalled, impacting the public finances.