Government borrowing has surged, putting Rachel Reeves in a tough spot as she navigates economic challenges and public scrutiny
London: Borrowing costs jumped in December, reaching £17.8 billion, the highest for that month in four years. That’s a hefty increase of £10.1 billion compared to last year.
This spike is mainly due to rising spending on public services, benefits, and debt interest. Even though tax revenues went up, the Tories’ National Insurance cut, which Labour kept, offset those gains.
In total, the Government borrowed £17.8 billion last month, which was way above the £14.6 billion that the Office for Budget Responsibility had predicted.
Interest on the debt also hit its third-highest level for December since records began in 1997, reaching £8.3 billion last month. This comes after a rise in interest rates on Government debt, driven by worries about the sluggish UK economy.
Reeves and her Treasury deputy, Darren Jones, had to step up and address the rising borrowing costs earlier this month to reassure the markets.
While at the World Economic Forum in Davos, Switzerland, Reeves defended her high-tax budget, saying she hadn’t heard any real alternatives from her critics.
She mentioned that if you’re stepping into a new business with major financial issues, you need to stabilize things, which means making tough choices. If you don’t, those problems will stick around for years.
Reeves expressed her desire for lower taxes and less regulation to help businesses thrive, but acknowledged that the current situation doesn’t allow for that yet.
The Government’s economic plan has had a shaky start, with upcoming official figures likely showing little to no growth in the first six months of Labour’s time in charge.
Labour is also looking to cut the benefits bill to reduce Government spending, with the Chief Secretary to the Treasury urging all ministers to be “ruthless” in finding budget cuts.
