Even after she’s gone, we’ll all be paying for chancellor Rachel Reeves (Image: Getty)
The Labour chancellor has already pushed Britain’s finances towards the abyss. By driving taxes to record highs, she’s crushed what little hope we had of generating the growth needed to stop the country sinking deeper into debt. Yet even after hammering businesses and workers alike, she still can’t get anywhere near balancing the books. As debt interest climbs and the Iran conflict drags on, Capital Economics reckons total borrowing could hit £147billion in this financial year.
Every penny will be piled onto our terrifying national debt of almost £3trillion. Britain is living way beyond its means and the reckoning is coming fast. Things could get even worse if Andy Burnham replaces Keir Starmer. There’s talk that he’ll replace Reeves with Ed Miliband, or possibly even pink-haired mobile phone fumbler Louise Haigh. I wouldn’t trust either of them to manage a savings account, let alone Britain’s finances.
But Reeves now seems determined to outbid them for economic insanity. With her latest wheeze, she’s finally lost the plot. Incredibly, she wants to revive one of the worst ideas of the entire Tony Blair and Gordon Brown New Labour era: the dreaded Private Finance Initiative.
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PFI was sold as a clever way to rebuild Britain without piling more debt onto the nation’s books. In reality, it was an accounting trick. Private firms funded hospitals, schools and infrastructure up front, then taxpayers paid the money back over decades with interest on top.
It allowed Brown to spend huge sums while pretending he wasn’t borrowing more, and damn the expense. Now those bills are overwhelming us. PFI funded £59billion of assets. In total they’ll cost taxpayers at least £230billion, and maybe as much as £300billion. PFI contracts are ridiculously long, with some running into the 2040s. The maintenance bills keep rolling in, with reports of contractors charging schools and hospitals £500 to change a lightbulb.
Now Reeves is considering doing the same thing all over again, but under the fancy rebrand of Public-Private Partnerships, according to The Daily Telegraph. Perhaps she thinks we won’t notice. The Treasury is asking investors how private money could fund Labour’s infrastructure dreams, including new towns and major building projects. They must be rubbing their hands at the small fortune heading their way.
The Treasury says lessons have been learned. Previous mistakes won’t be repeated. But if there’s one thing we know about this government, is that it doesn’t just repeat old mistakes, it makes plenty of new ones too.
This is another financial sleight of hand from a chancellor who has lost control of the nation’s finances. Since Reeves can’t openly borrow more without alarming the markets, she’s trying to shove liabilities off the books. But hidden debt is still debt.
At some point Britain has to face reality. Politicians have to stop pretending there’s endless money for every pet project and vanity scheme. Labour will never do it. The party’s left would explode at any attempt to curb spending. Things will only get worse while it’s in power.
Reeves is borrowing more today and dumping the bill onto the British taxpayer. And eventually, their children and granchildren too. We’ll all be footing the bill for Reeves decades after she’s gone. It’ll be something to remember her by.
Rachel Reeves has just gone completely loopy – she’s about to bankrupt Britain even more
Rachel Reeves is no longer Britain’s Chancellor, but arguments over the legacy of her fiscal policies are still shaping the country’s increasingly difficult economic debate.
Critics have accused Reeves of leaving behind a public-finance framework that could allow governments to borrow more for investment, while supporters have argued that changing the way government debt is measured was necessary to create room for infrastructure spending and long-term economic growth.
Now, with Chancellor John Healey preparing his first Budget on 28 October 2026, those arguments have become particularly important.
Britain is facing high borrowing costs, elevated public debt and limited fiscal headroom. The question is no longer simply whether Reeves borrowed too much. It is whether the rules and spending commitments established during her time at the Treasury have left her successors with enough room to respond to new economic pressures.
Reeves changed the fiscal rules
One of Reeves’s most consequential decisions was to change the government’s definition of debt used in its fiscal rules.
In 2024, the Labour government switched from public sector net debt to public sector net financial liabilities, or PSNFL.
The difference is significant.
PSNFL takes account of a broader range of public-sector assets and liabilities than the previous measure. Supporters argued that this could encourage productive investment because some government assets could be taken into account when assessing the overall fiscal position.
The Institute for Fiscal Studies estimated in 2024 that the change could create substantially more room for investment borrowing.
But the change also attracted criticism from opponents, who argued that it could make it easier for governments to increase borrowing while still claiming to meet their fiscal rules.
The House of Lords Library notes that Reeves’s changes potentially created additional room for borrowing for investment, while also highlighting the continuing pressures from debt interest, ageing and weak economic growth.
That distinction is crucial.
Changing the accounting measure does not mean Britain suddenly had unlimited money.
It changed the framework within which borrowing decisions were assessed.
Britain is carrying a huge debt burden
There is no question that Britain’s public finances remain under pressure.
Official figures cited in August showed total public debt at approximately £2.98 trillion, equivalent to around 94% of GDP.
In July alone, the government recorded a deficit of £1.8 billion, considerably worse than economists had expected. Spending growth outpaced receipts despite strong self-assessment tax payments.
During the first four months of the financial year, the cumulative deficit reached £56.7 billion.
That was below the equivalent figure from the previous year but still £2.3 billion higher than the Office for Budget Responsibility had forecast.
Those numbers explain why the argument about Reeves’s legacy has not disappeared.
Britain is not facing bankruptcy in the conventional sense. The UK remains capable of borrowing and servicing its debt.
But the cost of servicing that debt can become increasingly difficult when interest rates and gilt yields rise.
And that is precisely what has happened.
Borrowing costs have become the new problem
The biggest immediate challenge facing Healey is not simply the size of the debt.
It is the price of borrowing.
In September, the government paid 5.82% to borrow £4 billion through a 30-year gilt — the highest rate recorded for such borrowing since the Debt Management Office was established in 1998.
Higher yields mean that new borrowing becomes more expensive.
They also increase the cost of refinancing existing debt as older bonds mature.
That can rapidly consume money that might otherwise be available for public services, tax cuts or investment.
The consequences can be substantial.
At Reeves’s March forecast, the government had around £23.6 billion of headroom against its fiscal rules.
By September, analysts were warning that higher borrowing costs could eliminate a large proportion of that cushion.
One analysis cited by the Guardian estimated that headroom could fall from roughly £26 billion to £13.8 billion under the prevailing market conditions.
This is why the Budget is being watched so closely.
A government that has only a small amount of fiscal headroom has considerably less freedom to announce new spending without finding additional savings or revenue.
The economy is making the problem harder
The fiscal challenge is occurring at the same time as households are facing renewed economic uncertainty.
Inflation reached 3.1% in August, its highest level for five months, according to Reuters.
Prime Minister Andy Burnham has acknowledged that his government faces difficult economic decisions as borrowing costs rise.
The combination of higher inflation, expensive government borrowing and weaker fiscal flexibility creates a particularly awkward environment for a government that has made substantial commitments on public services and infrastructure.
Consumer confidence has also weakened.
A September S&P Global survey put its consumer sentiment index at 42.7, with more than half of respondents expecting borrowing costs to rise over the following year.
Mortgage rates have also climbed, adding pressure to households already dealing with higher living costs.
These conditions limit the government’s options.
Large unfunded spending increases could worry financial markets.
Large tax increases could weaken household and business confidence.
Large spending cuts could create political and social difficulties.
The Chancellor therefore faces a three-way balancing act between fiscal credibility, economic growth and public spending.
Was Reeves really “bankrupting Britain”?
The phrase is political rhetoric rather than a description of Britain’s actual financial position.
There is no indication that the UK is literally about to become bankrupt.
Britain continues to borrow in international markets, and government debt remains financeable.
The more serious issue is whether debt and interest costs are becoming sufficiently large to restrict the government’s choices.
That is a genuine fiscal problem.
The House of Lords Library notes that national debt is close to £3 trillion and that borrowing costs have been rising. It also highlights long-term pressures associated with an ageing population and public spending.
At the same time, the same analysis makes clear that the government’s fiscal position cannot simply be reduced to a story of reckless borrowing.
Public investment can create assets and potentially support future economic growth.
The argument is therefore about what Britain borrows for, how much it borrows and whether the resulting economic returns justify the additional debt.
The investment argument
Reeves’s defenders have consistently argued that borrowing for productive investment is different from borrowing simply to finance day-to-day expenditure.
Infrastructure can include transport, housing, energy systems and other projects intended to increase the economy’s productive capacity.
If investment raises future economic output, tax revenues can eventually increase as well.
This is one reason the Labour government changed the fiscal framework.
But investment is not automatically successful.
A project can cost more than expected, deliver less than promised or take years to produce economic benefits.
That is why the credibility of the government’s investment strategy matters as much as the headline borrowing figure.
The House of Lords Library notes that the PSNFL framework could give the government additional scope for investment borrowing, while also warning that rising borrowing costs and other spending commitments could reduce fiscal room.
Healey inherits the problem
Perhaps the most important point is that Reeves is no longer the person responsible for the next Budget.
John Healey became Chancellor under Burnham and is due to deliver his first Budget on 28 October.
Healey has repeatedly emphasised fiscal discipline.
The government has said it intends to maintain its fiscal rules, while simultaneously pursuing policies involving housing, infrastructure, defence and public services.
That combination will be difficult.
The House of Lords Library says Healey has committed to meeting the existing fiscal rules, while noting that borrowing costs could reduce the available headroom.
The Chancellor therefore cannot simply assume that the fiscal space available under Reeves will remain unchanged.
Markets have already demonstrated how quickly borrowing costs can move.
The October Budget will be the test
The coming Budget will provide a clearer indication of how the government intends to manage the situation.
Healey may have to consider some combination of spending restraint, tax changes, borrowing and investment adjustments.
There is also pressure to finance defence commitments.
At the same time, the government has promised significant reforms in areas such as adult social care.
The long-term costs could be substantial. The House of Lords Library cites Health Foundation modelling suggesting that providing funding for everyone currently receiving adult social care in England could imply an additional £18.5 billion of annual spending by 2035/36.
That illustrates why the fiscal challenge cannot be solved simply by looking at this year’s deficit.
Britain faces structural pressures that extend well beyond one Budget.
The Reeves legacy remains contested
Criticism of Reeves will therefore continue.
Her opponents argue that her fiscal-rule changes created additional scope for borrowing and spending at a time when Britain already had a large debt burden.
Supporters argue that the changes were designed to distinguish productive investment from ordinary expenditure and that investment is necessary if Britain is to improve its long-term growth prospects.
Both sides are responding to the same underlying reality: Britain needs stronger economic growth while simultaneously facing substantial spending pressures.
The difficult part is achieving both without allowing debt interest to consume an increasing share of government revenue.
That is where the current debate has moved beyond the political language of “bankruptcy”.
Britain is not literally on the verge of insolvency.
But neither is the country’s fiscal position comfortable.
With public debt approaching £3 trillion, long-term gilt yields at historically high levels and fiscal headroom under pressure, the government has limited room for error.
For Reeves, that means her decisions at the Treasury will remain part of the political argument long after she left the job.
For Healey, however, the responsibility is now his.
The October Budget will show whether the government can maintain its investment ambitions while satisfying the markets, meeting its fiscal rules and controlling the cost of servicing Britain’s enormous debt.
The central question is therefore not whether Rachel Reeves has literally “bankrupted Britain”.
It is whether the fiscal framework she helped create gives her successors enough flexibility to invest for growth without allowing Britain’s debt burden and interest bill to become an even greater constraint on future governments.