The hidden £1.3tn debt bomb in the Budget
The Daily T exclusive: Sir John Redwood uncovers more dishonesty from Rachel Reeves
Rachel Reeves will saddle the UK with a £1.3tn “debt mountain” over the course of this parliament after hiding an extra tranche of borrowing in her Budget, a report has found.
The Chancellor claimed that she is cutting debt and borrowing in her tax-raising Budget, telling the House of Commons last Wednesday: “My fiscal rules will get borrowing down while supporting investment … I said we would cut the debt and we are.
“Those are my choices. Not austerity, not reckless borrowing, but cutting the debt.”
Yet analysis by Sir John Redwood, Margaret Thatcher’s former senior economics adviser, shows that both debt and borrowing will continue to rise under Labour.
He claims that the Budget is misleading because it does not make clear that there is an extra £675bn bill to cover the cost of renewing existing borrowing in the form of government loans, known as gilts.
This is on top of £628bn increased government spending over the next five years.
Together, these two bills amount to a “debt mountain” of £1.3tn. The extra borrowing will take the national debt to £3.53tn – which equates to £50,840 for every man, woman and child in the country.
The revelation comes after the Chancellor raised taxes by £26bn at her second Budget last week as benefits were increased. Economists have already warned that the package has damaged growth.
Ms Reeves is also facing questions over her political future after it emerged she falsely represented the scale of the shortfall in the public finances.
Reeves ‘building a debt mountain’
In a report co-authored by Brexit Facts4EU, Sir John warns: “Rachel Reeves is building a debt mountain whilst claiming to bring the debt down. She wants to add a staggering £628bn to the state debt over the next five years, as if the £3tn the Government has already borrowed was not enough.
“She only brings in some tax rises at the end of the period to pretend late in the day to be doing something about her borrowing habits.
“Worse still for the bond market that she wants to provide her with all the money, is her need to borrow yet another £675bn to be able to replace existing debts as they fall due.
“It’s like watching someone who wants to go on a spending spree aim to take out a large overdraft, only to find they also need a pile of cash to repay the mortgage they already have when it expires.”
Pointing out that the Chancellor “is unlikely to be in charge” when tax rises kick in after the next general election, Sir John questions whether the bond markets will “find another £1.3tn”.
He said: “The Bank of England is a seller of bonds, no longer a buyer. It is now making it more difficult for the Government to lay its hands on cheap cash by selling bonds at the same time as the Government is trying to raise money.
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