Chancellor Reeves can easily plug the so-called “£22bn black hole” in the public purse without raiding the pockets of Britain’s pensioners, economists have claimed.
Chancellor Rachel Reeves holds a meeting with representatives from international banks. (Image: Kirsty O’Connor / Treasury)
The experts were speaking on the day the Office for National Statistics warned government borrowing last month was £13.7billion, £3.3billion more than 12 months ago, and the third-highest for that month since records began in 1993.
Additionally, the debt-to-GDP ratio rose by 4.3 percent compared with the same time last year, with a provisional estimate putting the figure at 100 percent.
The Government has faced significant criticism over plans to means-test the £300 winter fuel payment, meaning an estimated 10 million pensioners currently eligible will no longer be able to claim it, in a more which Ms Reeves claims will save £1.4billion.
However, David Belle, Founder and Trader at Fink Money, offered her a simple solution which would mean such drastic action was not required.
Labour Prime Minister Sir Keir Starmer. (Image: Getty)
He explained: “The first thing to ask is, ‘what black hole’? Not only could the ‘black hole’ be fixed by interest rate normalisation (lower rates lead to lower debt servicing costs), but you’d have to ask what the furore over it was according to these figures.“
Deficit spending was actually lower than that of the US, France, Japan and Italy, Mr Belle pointed out.
He acknowledged: “These are high. But the issue with UK spending is that it seems to be growth negative.
“The UK lacks a pro-growth policy, not spending. In this regard, yes the deficit and debt spending is something to be concerned about because it is not changing the denominator positively in the deficit/GDP equation.”
Proposed curbs to the winter fuel payment have angered many. (Image: Getty Images)
Gabriel McKeown, Head of Macroeconomics at Sad Rabbit Investments warned: “As public sector net debt climbs to levels not seen since the swinging ’60s, the future of the UK economy hangs in the balance.
“The latest figures on government borrowing paint a stark picture of the nation’s fiscal health and reflect the ongoing pressures on public finances.”
Such elevated borrowing levels underscored the government’s struggle to balance spending with income amid rising costs and economic uncertainties, Mr McKeown pointed out.
He continued: “This will likely necessitate difficult decisions in the forthcoming Budget, with the need to rein in borrowing without stifling the economic recovery being paramount.
“Inheriting a substantial fiscal deficit, Chancellor Reeves now faces the formidable challenge of addressing this financial shortfall without exacerbating the situation further.
“However, in a storm of rising costs and economic uncertainty, stabilising public finances is not just important, it’s vital for reigniting rapidly depleting confidence.”
John Choong, Head of Equities and Markets at Investors Edge said the figures “paint a grim picture for the Chancellor” with implications for her impending Budget on October 30.
He said: “The anticipated windfall from self-assessment (SA) tax receipts failed to materialise, stagnating at £1.5bn – a mirror image of last year’s take.”
Meanwhile, July and August’s combined SA receipts fell £1bn short of the OBR’s £15.4bn forecast.
He stressed: “The saving grace remains that cumulative borrowing is £6.3bn lower than the OBR’s March estimate, as the Bank of England’s quantitive tightening (QT) programme has helped to reduce interest costs through fewer bonds in circulation.
“However, any fiscal breathing room gained from QT could be swiftly eroded by another shortfall in next month’s figures.
“As such, Reeves now faces a high-stakes fiscal juggling act, as she must craft a Budget that walks the tightrope between fiscal prudence and economic stimulus, all while navigating the choppy waters of underperforming tax revenues and a consumer losing confidence.”
Speaking today, Prime Minister Sir Keir Starmer repeatedly said he did not want to “get ahead of the Budget”, as he was asked to rule out measures such as scrapping the single-person council tax discount and cutting the farming budget.
Asked about the single-person council tax discount, which gives people living alone 25 percent off their council tax bill, he told BBC West: “I am really concerned about this and obviously I’m not going to pre-empt the Budget, but I don’t want to risk putting the fear of God into people.”
Sir Keir added: “I don’t want to get into this, you know, ‘Will you rule out? Will you rule out? Will you rule out?’ because it just puts fear into people and I don’t want to do that.”
