The rising cost of servicing the UK national debt pushed up borrowing last month
How much ‘headroom’ might John Healey still have to keep within the government’s fiscal rules?
That’s the question dogging Westminster and the City.
“The chancellor has probably lost about half the headroom he inherited, leaving it between £10bn to £15bn. As long as the headroom is in double figures, he will probably be able to avoid topping it up, but the drop in headroom means any additional day-to-day spending, such as on defence or cost of living, will have to be paid for by higher taxes.
“What’s more, if the recent rise in energy prices is sustained through the next few months, household energy bills could rise by another 25% in January, which would take them above the level that the previous government capped them at. That would only further increase the pressure to act on cost of living by temporarily subsiding energy bills.
“The PM and chancellor will be feeling quite claustrophobic today as the walls close in around them. Borrowing costs keep climbing, while borrowing itself is outpacing the teeny rise in tax receipts.
Everyone can diagnose the problem, but it’s far from clear that a PM who swept to power promising good things for all is capable of holding a fractious Labour party together to carry out the tough work needed.”
