Nightmare for Andy Burnham as new figures show debt soaring
Conservatives accused Labour of “tapping the nation’s credit card while the bailiffs are at the door” as new figures showed national debt had reached nearly £3 trillion. The Government is spending nearly £7.7 billion every month just on interest - more than it spends on defence, police and prisons combined. Chancellor John Healey insisted the Government was cutting the deficit, saying: “Fiscal discipline is the bedrock of our UK economic stability and national security.”
But experts warned Mr Healey and Prime Minister Andy Burnham would be forced to increase taxes in the Budget on October 28 to avoid debt increasing even faster. New figures from the Office for National Statistics (ONS) showed government borrowing unexpectedly rose to £1.8 billion last month, £700 million than a year previously. It’s a blow because official spending watchdog the Office for Budget Responsibility had predicted a £500 million surplus. The borrowing hike also came even though more income tax than ever before has been collected.
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Total UK debt is now just shy of the £3 trillion key milestone, at a mammoth £2.985 trillion, or 94.1% of gross domestic product (GDP).
Sir Mel said: “The ONS has confirmed the national debt is now almost £3 trillion. That is over £100,000 of debt for every single household in Britain. And we are all paying for it, every day. We spend more on just the interest of our soaring debt than we do on our defence, police, and prisons combined.
“We simply cannot afford the price of Labour. They already plan to borrow over a quarter of a trillion pounds more than the plans they inherited. It is ordinary families, their children and grandchildren who are left to cover the bill.
“Only the Conservatives have a credible plan to get the national debt down with £50 billion in spending cuts, starting with the welfare bill.”
Income tax receipts hit £17.1 billion last month – up £1.7 billion on a year ago, according to the ONS.
But spending outweighed the tax boost, with another £2 billion spent on social benefits compared with a year ago, while the interest on government debt payments also rose by £700 million, to £7.7 billion last month.
Thomas Pugh, chief economist at RSM UK, said tax rises would be needed to allow the Government to stick to fiscal rules designed to limit borrowing.
He said: “The commitment to sticking to the fiscal rules means further tax rises are inevitable come the autumn Budget.
“The risk is that more borrowing to spend fuels inflation and pushes up gilt yields further, leaving the new Chancellor having to borrow more just to stand still.”
The figures come days after Prime Minister Andy Burnham said the new Manchester-based satellite office of Downing Street will take over responsibility for growth, while the Treasury will focus on controlling the public finances.
Grant Fitzner, chief economist at the ONS, said: “Borrowing was slightly higher this month than in July last year, with spending growth outpacing higher receipts, including from self-assessed taxes which often feed in more strongly in July.”