Burnham warned against using ‘accounting trick’ to ramp up borrowing
Andy Burnham and John Healey have been warned against using an “accounting trick” to ramp up borrowing given the volatility shaking bond markets and traders’ vigilance to extra gilt issuance. Analysts at Oxford Economics said that it looked likely the government would use extra borrowing across bodies like the British Business Bank and the National [...]
Finance experts Andy Burnham and John Healey have been cautioned against employing an "accounting trick" to increase borrowing amid heightened uncertainty in bond markets and heightened scrutiny from investors. According to analysts at Oxford Economics, it is probable that the government will utilize extra borrowing through entities such as the British Business Bank and the National Wealth Fund to finance infrastructure and housing expansion.
This would be accomplished through the deployment of "Pufins," or public financial institutions, which would enable additional borrowing to occur outside of the government's stringent fiscal rules on debt and the budget balance.
The utilization of Pufins could result in potential financial instability for public finances since a surge in long-term gilt yields due to a global bond market downturn might cause the government to incur up to £9bn more in expenses than anticipated, according to economists at the consultancy. Andrew Goodwin, an Oxford Economics researcher, cautioned that adopting an accounting trick to loosen policy in a substantial way could be perilous considering the current turbulent bond market situation. He emphasized that any additional borrowing must still be covered by higher gilt issuance.
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