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ING warns UK fiscal risks could unsettle sterling into autumn budget

ING says UK debt interest costs are high and rising, and notes investors may react to any changes to fiscal rules or tax allowances ahead of Burnham’s first budget.

Reported · Written up by our desk · Central Banks

ING economists say the United Kingdom’s public finances face strain from rising spending pressures and high, increasing debt interest costs, even as the government continues fiscal consolidation.

They point to frozen tax thresholds since 2021, which, after inflation effects, has pulled more people into higher tax brackets and boosted revenues as a share of GDP.

FXStreet reports ING also flags that potential policy shifts under Prime Minister Burnham, such as changes to fiscal rules or tax allowances, could refocus investor attention on UK fiscal risks into the autumn budget.

The economists add that investors have been more relaxed after Burnham committed to stick with existing fiscal rules, but ING says his openness to wider changes, including lifting the tax-free allowance and funding for social care, cannot be ruled out ahead of a first budget expected in October or November.

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