Higher public spending and debt interest payments have blown a £10bn hole in Rachel Reeve’s budget plans just days before the Chancellor launches another tax raid. In the final set of borrowing figures before Ms Reeve delivers her second Budget, the Office for National Statistics (ONS) said the deficit stood at £17.4bn in October.
That was £3bn higher than expected by the Office for Budget Responsibility (OBR) and means the Chancellor has already borrowed £116.8bn this financial year to plug the gap between tax receipts and public spending. It means borrowing to date was £9.9bn higher than predicted by the watchdog in March.
The ONS blamed higher inflation for pushing up costs, including higher welfare payments and pay rises for public sector workers. With just days to go until the November 26 Budget, economists widely expect Ms Reeve to embark on another tax raid on households and businesses, with some predicting increases of up to £25bn to balance the books.
While debt interest payments eased to £8.4bn in October, the annual figure is expected to remain above £100bn a year for the rest of the decade. James Murray, chief secretary to the Treasury, insisted the government had a plan to bring down borrowing. He said: “Currently we spend £1 in every £10 of taxpayer money on the interest of our national debt. That money should be going to our schools, hospitals, police and armed forces.”
At the Budget next week, the Chancellor will set out how she will take the “fair choices” to deliver on the public’s priorities to cut NHS waiting lists, cut debt and cut the cost of living. Ms Reeve is widely expected to extend a stealth tax on incomes, and raise more money from expensive homes, gambling taxes and pensions through salary sacrifice schemes.
