RACHEL Reeves has suffered a new setback after a surplus in government finances came in more than £5billion below forecasts.
Experts are cautioning that the Chancellor is on the verge of missing borrowing targets, which could lead to either tax hikes or spending cuts to adhere to fiscal rules.
Figures showed a record £15.4billion surplus in January — driven by tax receipts from self-assessments.
But that was well below the £20.5billion sum that the Office for Budget Responsibility had planned for.
Public borrowing is now on course to come in significantly higher than the OBR’s prediction of £127.5billion.
The UK deficit for the first ten months of this financial year is £118.2billion — £12.8billion above the forecasts.
The government is also spending £6.5billion on debt interest payments — the second biggest sum in 27 years.
Cara Pacitti, an economist from Resolution Foundation, pointed out that Ms Reeves may have to increase taxes or reduce spending to meet fiscal rules according to the OBR’s forecast on 26 March.
Shadow Chancellor Mel Stride said: “The latest borrowing figures expose the true cost of Labour’s reckless economic policies.”
According to Darren Jones, the chief secretary to the Treasury, they are meticulously reviewing every expenditure to ensure responsible management of public finances.
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