She claims to be “fixing the foundations” of the economy, but from where I’m standing, it looks more like the roof is caving in. Growth has stalled. The economy shrank by 0.3% in April, then slipped another 0.1% in May. We’re flirting with another recession.
Unemployment is rising fast, with 276,000 more people out of work since the Budget. It’s forecast to climb by another 100,000 before Christmas. This is a jobs bloodbath and Reeves pulled the trigger.
Spending cuts are now off the table, after Labour’s clumsy and humiliating U-turns on Winter Fuel Payments and disability benefits. Defence costs are climbing too, as tensions with Russia escalate.
So Labour is doing what governments always do when the numbers stop adding up, and fiddling the figures.
But one number cannot be massaged away. In June alone, government borrowing hit £20.7billion. That’s £6.6billion more than the same month last year, and the second-highest June borrowing total on record, beaten only by the Covid lockdown chaos of 2020.
Reeves is now on track to borrow £170billion this year, despite hiking taxes by £40billion in March and planning another £30billion tax grab in her October Budget.
We’re taxing more, earning less, and spending faster. There’s a word for this. Bankruptcy.
So where did most of June’s borrowing splurge go?
If you thought it was spent on the NHS, fixing roads, boosting defence or helping pensioners, think again.
Of that £20.7billion, a staggering £16.4billion went purely on interest payments. More than three quarters of the money Reeves borrowed last month went straight to creditors.
It wasn’t invested in services, infrastructure or growth. It certainly didn’t pay down any of our debt. Instead, Reeves is effectively borrowing on one credit card to cover the interest racked up on another.
This can’t go on. The £170billion we borrow this year will be added to the mountain of existing debt, now nearing £2.87trillion. And none of it is being repaid.
The interest bill keeps ballooning, dragging us deeper into the hole.
Hedge fund billionaire Ray Dalio says Britain is caught in a financial “doom loop” due to a lethal mix of rising taxes, ballooning debt and stagnating growth.
Britain now pays the highest interest rates on government borrowing in the developed world. Further tax hikes won’t plug the gap. Instead, they’ll slow the economy and shrink the tax take further.
The Labour left’s answer is a wealth tax, but that would be complicated, expensive and scare even more investment abroad.
The Tories deserve blame too. They piled up debt during the pandemic and started the tax hikes rolling. Before them, Gordon Brown left a big hole.
Now ageing demographics, soaring sickness benefit claims and Donald Trump’s tariffs are adding pressure. Artificial intelligence may destroy still more jobs.
For years, nobody has faced up to the problem. Reeves is just speeding the decline by draining confidence and choking growth.
Borrowing money to pay the interest on borrowed money is a fast track to ruin. And we’re almost there.