LONDON (HPD) — British government debt rose to its highest level in nearly 60 years last month and retail sales fell, highlighting the scale of the challenges facing whoever replaces Prime Minister Liz Truss after her government imploded under the weight of his financial plan.
Public debt rose to 98% of economic output in September as soaring inflation pushed up interest payments on what the government owed, the Office for National Statistics reported on Friday. It is the highest level since 1963, when Britain was still paying debts accumulated during World War II.
Deepening the pessimism were figures showing retail sales fell for the second consecutive month and are now 1.3% below pre-pandemic levels.
“Today’s weaker-than-expected public debt figures… are a reminder that, in the current political turmoil, the tough task facing the government of proving its fiscal credibility is immediately ahead, rather than behind.” warned James Smith, director of research at the Resolution Foundation, a think tank specializing in improving living standards for low- and middle-income people.
Britain has begun the process of choosing its third head of government in less than four months, after Truss was forced to resign on Thursday after weeks of turmoil over her economic plans.
The new premier’s first task will be to restore credibility following Truss’s decision to announce a 45 billion pound ($50 billion) package of tax cuts, without saying how he would pay for them, fueling fears of a runaway government debt that baffled investors and voters and forced emergency intervention by the (central) Bank of England.
Treasury Secretary Jeremy Hunt, who took office last week, has reversed most of Truss’s program and has promised that debt will begin to fall as a percentage of gross domestic product in the coming years.
That has stabilized financial markets after Truss’s plans sent the pound plunging to record lows, threatened the solvency of some pension funds and pushed up borrowing costs for the government and millions of homeowners.