RACHEL Reeves has been dealt another blow by the financial markets as Government borrowing spiked – heaping yet more pressure on the Treasury.
Borrowing costs leapt in December to hit the highest level for that month in four years, reaching £17.8 billion last month, up by £10.1bn in December 2023, according to official figures.
That spike was driven by spending on public services, benefits and debt interest – all up on the year – while increased tax revenues were offset by the Tories’ National Insurance cut, which Labour have kept in place for workers.
In total, the Government borrowed £17.8bn last month – much higher than the £14.6bn forecast by the Office for Budget Responsibility.
Interest charged on debt reached its third-highest level for December since records began in 1997, hitting £8.3bn last month.
It comes after a surge in interest rates charged on Government debt, fuelled by concerns about the sluggish UK economy.
That push fell back but Reeves and her Treasury deputy Darren Jones (above) were both forced to make public statements on the cost of Government borrowing earlier this month in a bid to calm the markets.
Speaking at the World Economic Forum in Davos, Switzerland, Reeves defended her high-tax Budget arguing that she did not hear “any real alternatives” from her critics.
She said: “If you’re a CEO or a CFO and you’re coming into a new business, and you’ve got these massive problems with your finances, you have to stabilise them and that requires difficult decisions, but if you don’t make those decisions, you’re going to be plagued by them for years to come.
“So, we have now wiped the slate clean. Businesses can be confident of that.
“My instinct is to have lower taxes, less regulation, make it easier for businesses to do business.”
The Chancellor said she would like taxes to be lower on workers and businesses but added: “We’re not in that place yet.”
The Government’s plan for the economy has got off to a rocky start, with the prospect of official figures next month showing little to no growth in the first six months of Labour’s administration.
Labour are looking to cut the benefits bill as a way of bringing down Government spending, with the Chief Secretary to the Treasury demanding all ministers be "ruthless" in identifying parts of their budgets that can be slashed.
