Grab your tin hats. Chancellor John Healey’s first Budget is one week away, and you’re going to need them.
The news just gets worse for Labour Chancellor John Healey (Image: Getty)
The news just keeps getting worse for the chancellor. Healey already had a £35billion black hole in his Budget plans, according to the Institute for Fiscal Studies. After this morning, it’s even deeper and wider. So what’s he going to do about it? He daren’t borrow more, as the bond market is watching us like a hawk, and he won’t cut spending, because PM Andy Burnham won’t let him. That leaves only one option. Tax. Healey is in a jam. And this morning, he got the very last news he wanted.
September’s inflation figure landed at 3.5%, up from 3.1% in August. That’s even higher than expected and will make life harder for all of us as food, fuel and energy costs keep climbing. In a further blow, higher inflation could force the Bank of England to hike interest rates in November, driving up mortgage rates and crushing the little economic growth we have. But that’s not the only blow Healey suffered today.
You’d have thought that after all the taxes former chancellor Rachel Reeves has hiked, the government would be generating enough revenue to make ends meet. But no, because she went on a massive debt-funded spending spree. In September, we borrowed another £24.5billion, again, more than expected. It was also the second-highest September figure on record. It was the same in August, July, June… and yes, under the Tories too.
The UK broke another unwanted record today, as public sector net debt officially exceeded £3trillion for the first time in our history. It took 300 years for the national debt to hit £1trillion, in 2010. The next trillion took just 10 years, and the latest only six. It’s on course to hit £4trillion within the next decade.
Some on the left claim debt doesn’t matter. Don’t believe them. They’re just want to borrow and spend even more. Trust me, government debt is a nightmare. It helped trigger the French revolution, and it’s behind today’s French riots too. Yet what do the all those hooded protestors want? More tax, more borrowing, more spending. It’s a fiscal death spiral, and Britain has entered it too. Ultimately, debt destroys countries.
Healey will have to rip up his sums again and find a new way to plug the fiscal hole. There’s no chance he’ll do it by cutting the ever-expanding welfare bill. Andy Burnham won’t allow it. He saw what Labour backbenchers did to Keir Starmer when he tried. The PM would rather cut the military than social security, even as the threat from Vladimir Putin grows.
Yesterday, Healey wisely ruled out hiking capital gains tax, but that only means the money will have to come from somewhere else. So brace yourselves. October 28 could be another tax and spend bloodbath. Labour’s third in a row. I’ll be watching it like a hawk. With my tin hat on.