The chancellor should be more worried about the risk of the cost-of-living crisis plunging the UK into a recession later this year, than higher debt costs, economists warn. Rishi Sunak faces a trade-off between trying to trim the public debt or easing pressures on households when he delivers his spring statement at the dispatch box on Wednesday. Public sector borrowing was almost £26bn less in the financial year to February than forecast by the Office for Budget Responsibility in October. This, combined with a higher tax take than expected, gives the chancellor sufficient fiscal headroom to ease the cost-of-living sting for households, economists and analysts said. Still, some are concerned that the Treasury will only make tweaks to fiscal policy amid an ongoing, real terms drop in benefits, and as it introduces a hike in national insurance contributions equivalent to 10% for most earners. A view expressed by some commentators is that if you don’t cut taxes and increase benefits you increase the risk of a recession later this year. That, some fear, will cause far more harm to the economy and the public finances. The Resolution Foundation has also warned that the risk of a recession “is looming into view” amid a worsening cost of living crunch. It comes as a clutch of international institutions including the global lender of last resort, the International Monetary Fund, have warned that elevated energy costs and the wider economic fallout from Russia’s invasion of Ukraine pose risks to global growth.

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