Fears of new tax rises as government borrowing surges | Personal Finance | Finance
The £40 billion of tax rises included in the budget may not be the last following a surge in government borrowing, it is claimed.
Public sector net borrowing came in at £17.4bn in October, which was £1.6bn more than a year ago and the second-highest October on record.
This meant that total borrowing for the period between April and October was £96.6bn, which was some £1.1bn higher than for the same period last year.
The cost of paying the interest on the national debt is proving to be a huge drain on the public purse.
When the Tory-led government came to power in 2010, the UK national debt was a little over £1 trillion, however that had risen to £2.9 trillion when the Conservatives were ousted in the general election earlier this year.
Increases in public sector pay for doctors, train drivers, nurses and others have put a burden on government finances, while measures to protect public services against cuts have also pushed up borrowing.
The Chancellor Rachel Reeves indicated that the tax rises announced last month would be the last of this Parliament, however City experts believe the worsening finances suggest this may not be the case.
Matt Swannell, Chief Economic Advisor to the EY ITEM Club, warned that the situation means that future tax rises ‘cannot be ruled out’.
He said: “Continued spending pressure is the main reason that borrowing is higher than in 2023-2024.
“The Budget saw an increase in spending, taxation, and borrowing. As a result, fiscal policy will be looser than previous plans suggested.
“Despite the changes announced at the Budget, fiscal policy will continue to tighten over the next few years. Moreover, the Chancellor has left herself little wiggle room against her own fiscal rules and may need to implement more tax rises in future years if the tax take disappoints or spending proves higher.
“Indeed, if the rise in market interest rates since the Budget is sustained, the Government would already have less headroom against its fiscal targets.”
Alex Kerr, an economist at Capital Economics, said: “October’s disappointing public finances figures underline the fiscal challenge that the Chancellor still faces, despite the big increases in spending and taxes announced in the Budget.
“And while the Chancellor has downplayed the chances of further tax-raising measures, if she wants to increase day-to-day spending in future years, she may need to raise taxes to pay for it.”
Chief secretary to the Treasury, Darren Jones, responded to the figures saying: “This government will never play fast and loose with the public finances.
“Our new robust fiscal rules will deliver stability by getting debt down while prioritising investment to deliver growth.”
