UK’s debt, welfare costs set to surge by $60.7 billion, says FT

Bloomberg

Inflation and higher interest rates will push up the UK’s debt serving costs and social welfare spending by more than £50 billion ($60.7 billion) in next fiscal year, according to Financial Times (FT) calculations.
The bill for servicing government debt will almost double,
to £95 billion ($115.35 billion) from £50 billion ($60.71 billion), given that about £500 billion ($607.09 billion) of the country’s borrowing is tied to the consumer price index, the newspaper reported. Prices have risen to a 40-year high this year so far, with inflation expected to peak at over 13%.
While cost of repaying the loans may fall once price gains start easing, that will be offset by welfare payments which are anticipated to rise by £23 billion ($27.93 billion) every year by the time of the next election,
according the newspaper.
The situation could worsen further. The Bank of England has warned of a recession that would slow tax revenues amid higher costs, adding to the challenges facing the next prime minister.
Following the Spring Statement in March, the Office for Budget Control concluded that the government was left with £30 billion of headroom despite a package of tax cuts. That figure is contentious given how much the landscape has changed since the statement was delivered, including a 0.1% contraction in the UK economy in the second quarter.
In the leadership contest to become the next prime minister, Foreign Secretary Liz Truss and former Chancellor Rishi Sunak have relied on the March estimates to drive their economic agenda — without factoring in the looming recession, soaring inflation and higher interest rates, according to the newspaper.

UK Inflation Shock Is Within Whisker of
Double Digits
Rampant inflation may be showing some signs of slowing in the US, but the surge on the other side of the Atlantic looks to have further to run.
UK figures due on Wednesday are expected to show price gains hit 9.8% in July — the latest step on a march higher that the BOE predicts will reach more than 13% by October.
The release forms the centerpiece of a flurry of data in Britain that also sees reports covering unemployment, wage growth, retail sales, and public finances.
Inflation is peaking later and higher in the UK than in the US, partly as a result of its energy price-cap mechanism that slows the passthrough of higher prices to British households. Cornwall Insight has predicted the typical annual bill will rise about 81% in October, to more than £3,500.
The jump in prices is heaping pressure on the UK government to do more to help consumers, and forcing the BOE to take drastic action to curb headline inflation already almost 5 times the official 2% target.
Officials hiked interest rates by a half-point earlier this month, even as they forecast that a run of seven quarters without growth would start later this year.
On top of that headache, the central bank is also getting dragged into the battle to replace Boris Johnson as prime minister, with front-runner Liz Truss saying she’ll reexamine the BOE’s mandate if chosen by Conservative Party members.