Labour has warned repeatedly that the economic inheritance from the Conservatives will require “painful” decisions ahead of the 30 October budget…reports Asian Lite News
The scale of the challenge facing Rachel Reeves ahead of the autumn budget has been laid bare by a rise in Britain’s national debt to the highest levels since the 1960s and a collapse in consumer confidence.
Figures from the Office for National Statistics (ONS) showed the government’s outstanding debt pile reached 100% of gross domestic product in August, the highest level since 1961, as monthly borrowing rose by more than expected.
Labour has warned repeatedly that the economic inheritance from the Conservatives will require “painful” decisions ahead of the 30 October budget, including tax rises and cuts to welfare benefits and other spending.
Figures released by data provider GfK on Friday revealed a sharp fall in consumer confidence in September to the lowest level since March, blaming households’ concern about Reeves’s cuts to winter fuel payments and the prospect of further spending restraint at the budget.
“Consumers’ reaction to the government’s warnings shows that Reeves will need to be careful to not overdo the fiscal tightening next month,” said Elliott Jordan-Doak, a senior economist at the consultancy Pantheon Macroeconomics.
According to the latest snapshot from the ONS, government borrowing – the difference between public sector spending and income – was £13.7bn, an increase of £3.3bn on the same month a year earlier, and the third highest August deficit since monthly records began in January 1993.
The national debt – the sum total of every deficit – rose by 4.3 percentage points during the year to August to 100% of GDP, meaning an overall debt pile equal in sie to the annual value of everything produced in the economy.
Darren Jones, the chief secretary to the Treasury, said the figures demonstrated the challenging state of the public finances left by the Conservatives, which would force Labour to take “tough decisions” to rebuild the economy.
“When we came into office, we inherited an economy that wasn’t working for working people. Today’s data shows the highest August borrowing on record, outside the pandemic. Debt is 100% of GDP, the highest level since the 1960s,” he said.
The figures came amid growing pressure on the government to ease tax increases and spending cuts pencilled in for the 30 October budget, after Keir Starmer told the public to expect “painful” decisions after finding what Labour called a £22bn hole in the public finances.
Reeves announced in August she would scrap winter fuel payments for most pensioners, shelve plans for social care reform and axe road, rail and hospital investment as the first stage of a plan to reduce borrowing.
However, concerns are growing within Labour ranks that the downbeat tone is damaging the government, while economists have warned that measures hitting consumer confidence could hurt growth and jobs.
The latest snapshot of the public finances from the ONS showed that while tax receipts grew strongly in August, this was outweighed by higher expenditure – largely caused by benefits rises and higher spending on public services owing to increased running costs and pay.
While official figures had put the debt ratio above 100% last year, the ONS said revisions meant this was the first time since 1961 the reading had equalled the size of the economy.
Matt Swannell, the chief economic adviser to the EY Item Club, said: “At what is almost the halfway point of the fiscal year, the UK’s fiscal position remains challenging, and Treasury analysis suggests that the situation may deteriorate further over the remainder of the year.
“The government will likely have to increase spending over the next few months, due to a combination of accepting the recommendations for higher pay increases from public sector pay boards and non-labour cost overruns across a range of government departments.”
ALSO READ: Starmers’s Gray Quid Row
