Can The Chancellor Avoid A Budget Omnishambles?

Some mixed news for Rachel Reeves with one week to go until her Budget... and, on balance, it’s encouraging.

- SEAN O'GRADY

First, the parlous state of the “in-year” public finances was confirmed with the announcement that the government borrowed £16.6bn in September – the worst September since such records began in 1993, excepting only the pandemic year of 2021. Although this was not as bad as economists feared, it was still above what the Office for Budget Responsibility had been expecting on the basis of its last forecasts, suggesting the “black hole” identified by Reeves is real.

Second, the International Monetary Fund boosted its growth forecast for the UK for 2024 to 1.1 per cent, up from 0.7 per cent; it will be 1.5 per cent in 2025 (unchanged). That more fundamental factor gives some small comfort to Reeves as she approaches her first Budget.

Why is borrowing so high?

Because both this government and its predecessor have raised less and spent more than envisaged. The Conservatives, for example, cut national insurance contributions twice and pinned their hopes on hopelessly unrealistic public spending plans. They also postponed the implementation of pay rises for train drivers and doctors that had been recommended by the independent pay review boards. It’s true that Labour chose to honour those commitments soon after they came to power to restore industrial peace and stem the trend of medics emigrating and quitting the NHS. But it was still a political choice, and it represents about £9bn a year out of the £22bn hole.