How Rachel Reeves’ record tax raid condemned Britain to declining economic growth

Ms Reeves’s first budget included a significant increase in borrowing driven by increased government spending, which the OBR said would push the deficit by an average of £32.3 billion a year until the end of the decade. Annual borrowing is expected to rise to £127 billion this year, up from a forecast of £87 billion in March.

It also revised down its forecast for borrowing by the end of the decade from a March forecast of £39bn to £72bn in 2028-29.

The Chancellor confirmed changes to her annual borrowing and total debt targets to take account of the benefits of investment spending. The new measure, which will allow Ms. Reeves to borrow for her National Wealth Fund, will also offset the impact of rising student debt.

“This means we are counting the benefits of investment, not just the costs, and freeing up our institutions to invest,” she said.

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

However, he warned that total debt will continue to rise compared to the rest of the decade. Public sector net debt, which was the target of Jeremy Hunt, Ms Reeves’ predecessor, could rise from 91.8% of GDP to 95.8% of GDP, according to Parliament.

Richard Hughes, chairman of the OBR, also warned Downing Street about the UK’s debt, saying: “Interest costs on this debt are also higher and are now forecast to exceed £100 billion in each of the next five years.

“This is the first forecast we have made for a very long time, and perhaps ever, that the cost of servicing the public debt has exceeded £100 billion a year. These costs will not disappear simply by switching to a different financial measure. One of the reasons why the tax burden in this country has risen so much in recent years is that interest on debt is much more expensive.”