MNI BRIEF: UK Needs GBP50 Billion Fiscal Consolidation - NIESR

A fiscal consolidation of GBP50 billion should be in UK Chancellor of the Exchequer Rachel Reeves' budget on Nov 26, the National Institute of Economic and Social Research said on Wednesday, in order to build a headroom of one to one-and-a-half percent of GDP.

"A buffer of at least GBP30 billion" is needed to "avoid a cycle of repeated fiscal resets," NIESR Director David Aikman said, after Reeves only met her fiscal rules by GBP10 billion of headroom in her budget in March. (see MNI INTERVIEW: UK Needs To Slash Spending Share Of GDP- Chadha )

Still, "the key issue is the arithmetic of debt sustainability," rather than the fiscal rules, he said, as the difference between real rates and trend growth mean the government needs to run a primary surplus to decrease the debt stock, which it has not managed in over two decades. (See MNI INTERVIEW: UK Debt Stabilisation Insufficient - NIESR Head)