Business bears the burden of borrow-and-spend tactic

Rachel Reeves hopes her historic rise in tax, coupled with spending on the NHS and other investments, will kickstart the economy and get Britain's debt under control.

- HOWARD MUSTOE

The level of her ambition and the size of the mountain she must climb can be seen in the numbers. Britain owes £2.7 trillion an amount set to creep up each year through the rest of this parliament, and growth is expected to be no more than 2 per cent over the same period. The chancellor plans on raising tax by £40bn, much of it from businesses. She will spend £22.6bn more on the NHS to get it back on its feet.

Paul Johnson of the Institute for Fiscal Studies said her gamble is twofold. “The first gamble is that a big cash injection for public services over the next two years will be enough to turn performance around,” he said. If she gets it wrong, she will need to raise taxes again. If she gets it right, it could mean growth. “Which brings us to the second gamble: that this extra borrowing will be worthwhile,” he added.

Borrowing will be stepped up over the next four years, from £59bn a year to £85bn a year, with the funds earmarked for schools, hospitals and green energy projects. If this spending helps growth, her plan will work – but more debt means more debt payments.