Hammer blow for Rachel Reeves as borrowing spikes to highest outside of Covid crisis ahead of crucial Budget – with fears Labour’s public sector pay splurge has fuelled chaos in finances_Nhy
Rachel Reeves suffered a blow today as September borrowing spiked to the highest level outside of Covid ahead of her crucial Budget.
As the Chancellor prepares to unveil an eye-watering package of tax hikes, official figures showed the government racking up another £16.6billion last month.
The level has only been worse in 2020 and 2021 – when the pandemic was raging. Although the grim stats are too late to affect the fiscal event next Wednesday, they underline the scale of the problems facing Ms Reeves.
The Office for National Statistics pointed to bumper public sector pay deals as fuelling the increased spending.
The Treasury has been briefing that Ms Reeves needs to fill a £40billion shortfall in the books, with Brits braced for the biggest tax-raising Budget in more than 30 years.
As the Chancellor prepares to unveil an eye-watering package of tax hikes, official figures showed the government racking up another £16.6billion last month
Rachel Reeves suffered a blow today as September borrowing spiked to the highest level outside of Covid ahead of her crucial Budget
She is likely to raise billions from employers’ national insurance contributions – despite claims that will break the Labour manifesto and amount to a ‘tax on jobs’.
Meanwhile, the long-running freeze on tax thresholds is set to be extended again, and inheritance tax and pension pots could be targeted.
The ONS said public sector net borrowing was £2.1billion more than a year earlier, although the headline figure was slightly lower than analysts had pencilled in.
In the financial year to date, borrowing stood at £79.6billion, £1.2 billion more than a year earlier and £6.7 billion more than forecast by the OBR fiscal watchdog.
Central government benefit payments fell for the first time since early 2022, after Labour stripped winter fuel allowance from millions of pensioners.
Jessica Barnaby, ONS deputy director for public sector finances, said: ‘Borrowing this month was about £2billion up on last year, making this the third highest September figure on record.
‘While tax revenue increased, this was outweighed by increased spending, partly due to higher debt interest and public sector pay rises.’
Economists said the data were ‘disappointing’ for the Chancellor.
