How Rachel Reeves’ record tax raid condemned Britain to lower growth

Ms Reeves’ first budget included a substantial increase in borrowing, driven by higher government spending, which the OBR said would increase the deficit by an average of £32.3 billion a year until the end of the decade. It expects annual borrowing to rise to £127 billion this year, up from a forecast of £87 billion in March.

The country has also revised its credit forecast towards the end of the decade, from a March forecast of £39 billion to £72 billion in 2028-2029.

The Chancellor confirmed a change to her annual targets for borrowing and general debt to take into account the benefits of capital spending. The new measure, which allows Mrs Reeves to borrow for her National Wealth Fundalso eliminates the impact of rising student debt.

“This means counting the benefits of investments, not just the costs, and giving our institutions the space to invest,” she said.

The OBR said this new measure would keep “net financial debt” relatively flat at 83.4% of GDP by the end of the decade.

However, it warned that overall debt was on track to continue rising over the rest of the decade. The net debt of the targeted public sector by Jeremy HuntMrs Reeves’ predecessor, is on track to rise from 91.8% of GDP to 95.8% of GDP compared to Parliament.

Richard Hughes, the chairman of the OBR, also fired a warning shot at Downing Street over Britain’s debt, saying: “Interest costs on these debts are also higher and are expected to exceed £100 billion in each of the next five years.

“This is the first prediction we have made in a long time, possibly ever, where the cost of servicing the national debt was over £100 billion every year. These costs do not simply disappear because another budget measure is used. One of the reasons why the tax burden in this country has increased so much in recent years is the fact that interest on debt is simply a lot more expensive.”