Rachel Reeves Faces Scrutiny Over One Point Three Trillion Pound Debt Forecast

Rachel Reeves is under increasing pressure after analysis reveals her latest Budget proposals could add £1.3 trillion to the United Kingdom’s national debt during this parliament. Despite her claims in the House of Commons that fiscal rules would secure falling borrowing and reduced debt, critics state the figures tell a different story.

Sir John Redwood, a senior adviser under Margaret Thatcher, asserts that the Chancellor’s Budget masks an additional tranche of borrowing. The calculations indicate an extra £628 billion in government spending over five years combined with £675 billion needed to refinance existing government loans, known as gilts. Together, these amounts create what Redwood has labelled a debt mountain, with the total national debt projected to reach £3.53 trillion. This equates to approximately £50,840 for every person in the country.

In her recent Budget, Reeves raised taxes by £26 billion alongside an increase in benefit payments. Some economists argue this package has already hindered economic growth. Worries persist that the Budget underestimates future borrowing needs, as significant tax rises are not scheduled until after the next general election.

The current bond market environment is less favourable for government borrowing. The Bank of England has shifted from a buyer to a seller of bonds, limiting the government’s access to inexpensive funds. Pension funds, historically major buyers of government debt, are also scaling back their bond purchasing after significant losses in recent years.

Redwood has urged caution, warning that annual spending on debt interest may rise to £125 billion or more, further straining public finances. He questions how the government plans to cover these growing costs, and whether additional tax hikes will inevitably follow.

The Office for Budget Responsibility recently disclosed that Reeves did not account for a £4.2 billion boost in fiscal headroom when outlining potential tax increases in November, leading to accusations of misleading the public regarding a so called black hole in the public accounts. Recent polling now indicates that Labour is less trusted to manage the economy than the Conservatives during the aftermath of the Truss administration’s controversial mini Budget.

Many analysts highlight the urgency of tackling public debt, warning future generations will bear the financial consequences if further decisive action is not taken.