The year 2022 was also one of political instability The U.K. is arguably in a more fragile situation for the U.K. Disagreements within the Conservative than other developed economies. Growth is Party led to three different prime ministers already weak and global inflation shocks are (and four different Chancellors of the Exchequer). amplified given that it is a small, open economy. Despite the aggregate fiscal consolidation of the To bring inflation back down to target, the Autumn Statement, policy is actually set to ease economic sacrifice—ultimately through higher in the next two financial years to protect the unemployment—could be larger. economy during recession, with the expected tightening occurring thereafter (Figure I-23). Raising interest rates sharply to address this heightened inflation challenge may also unveil Concerns remain over the sustainability of the hidden risks, particularly given the U.K.’s relatively U.K.’s debt profile. Although the debt-to-GDP large financial sector. The stress experienced by ratio, at below 100%, is lower than in many some domestic pension funds amid volatility in other developed economies, substantial fiscal the gilt market earlier this year is one example consolidation was penciled in the Autumn of this risk to financial stability. Statement to prevent it from rising significantly in the next five years (Figure I-23). FIGURE I-23 A modest loosening in fiscal policy until 2024 % ) Spending gP n iD Tightening Tax n el G sa Total on oi l /m go n i  n n e t h g if  t  et% o N( Loosening – / / / / / / Sources: Vanguard and the OBR, as of November 21, 2022. 29