London (Bloomberg): Britain will see billions piled onto its budget deficit this week as it accepts the real cost of student loans to the public purse.
The move is expected to add more than £11 billion (Dh50.25 billion; $14 billion) to a deficit that is already rising much more quickly than forecast this year. The increase will make it all-but impossible for Chancellor of the Exchequer Sajid Javid to deliver on his promise to end austerity next year without breaking the key fiscal rule introduced by his predecessor Philip Hammond.
In reality, Javid’s room for manoeuvre was already limited, with the economy losing momentum ahead of Brexit and government borrowing on course to significantly overshoot forecasts this year. A no-deal departure from the European Union would almost certainly put another dent in the public finances.
Existing fiscal rules require structural borrowing to be less than 2 per cent of GDP in 2020-21. The deficit including student loans was forecast to come in £15 billion below the ceiling but Javid used up most of that “headroom” this month when he unveiled the biggest spending spree for 15 years.