Reeves admits taxes are too high

Yahoo

24-07-2025

Rachel Reeves has admitted that taxes are too high despite refusing to rule out further increases in future.
Speaking before the House of Lords, the Chancellor said that a combination of rising taxes and a ballooning debt bill is holding back the economy.
That is despite raising taxes by a record £40bn during her first Budget and repeatedly failing to say she will not raise levies further this year.
'We are living in an age of insecurity today, and economic policy has to respond to the moment which we live in,' she said.
'At the same time, we also have a challenging economic inheritance, with high levels of tax as a share of GDP, historic high levels of government debt, and also economic growth that really for the last 15 years has been very poor by historical standards, because of weak productivity growth.'
Ms Reeves's appearance before the Lords came just hours after new figures revealed the Government borrowed more than £20bn in June alone, piling further pressure on Britain's debt interest bill.
The Chancellor acknowledged this is a problem but said she is trying to reduce borrowing costs.
'£1 in £10 the Government is spending is spent servicing Government debt,' she said. 'I am a Labour politician, I don't think there is anything progressive about spending £100bn per year - often to US hedge funds - when I would rather spend that money on the health service or defence or on better schools for our children.
'That is why I am going to stick to the fiscal rules, so that we can start to bring down the cost of servicing that debt.'
However, the Office for Budget Responsibility has already warned the cost of servicing the UK's debt pile is unlikely to fall any time soon.
The fiscal watchdog expects the Government to borrow tens of billions of pounds more each year than it previously forecast before Labour came to power.
Current estimates show that national debt will rise to £3.3 trillion by 2029, up from £3.1 trillion under the Conservatives.
The OBR predicts this will result in an annual debt interest bill of more than £130bn by the end of the decade, far higher than £111.1bn recorded this year.
Despite her move to increase taxes and borrowing, the Chancellor warned that the Government cannot bow to backbenchers' requests to ramp up spending.
'You cannot do everything that everybody would like to do,' Ms Reeves told the Economic Affairs Committee.
'There are always going to be more demands on public resources than we have money available, and we have to prioritise.
'There is not a limitless pot of money, as much as people might like there to be, or sometimes think there is. Even with the additional money available, we still have to make priorities.'
Ms Reeves declined to comment on what might constitute a sustainable level for the tax burden, instead arguing that it is critical to find other ways to boost economic growth.
'One of the big challenges we've faced is the difficulty in actually getting things done - whether it is building transport infrastructure, energy infrastructure, the homes that we need, the digital infrastructure which is so important,' the Chancellor said.
She urged the Lords to pass the Government's planning reforms to help growth, arguing that every day counts when it comes to boosting building.
'Every day, week, month that passes is another day, week, month, that keeps the cost of infrastructure investment too high, and much higher than they are in comparable countries,' she said.
'The reason that HS2 is not coming to my home city of Leeds any time soon is because, as a country, we have cared more about the bats than we have about the commuter times.
'We have got to change that. I care more about a young family getting on the housing ladder than I do about protecting some snails.'
Mel Stride, the shadow Chancellor, blamed Labour for the rising tax burden.
'Rachel Reeves has pushed taxes to a record high – but now she cannot say if they will ever be cut under a Labour government,' he said.
'Labour must recognise that we cannot keep increasing taxes. Businesses are closing, jobs are being slashed, inflation is spiralling and the economy is shrinking, all thanks to their economic mismanagement.'
06:49 PM BST
Donald Trump says Jay Powell will be out in eight months
Donald Trump has said Jay Powell will be out of his job as chairman of the Federal Reserve in eight months.
Speaking at the White House, Trump said: 'I think he's done a bad job but he's gonna be out pretty soon anyway - in eight months he'll be out.'
The comments suggest Trump will not seek to immediately remove Mr Powell before his four-year term ends on 16 May 2026.
Trump will be given the option to pick a new chairman of the Federal Reserve when Mr Powell's term ends next year.
It comes after Trump last week said it's 'highly unlikely' he will try and fire Mr Powell before his current term ends, 'unless he has to leave for fraud.'
Trump's comments followed reports he had asked White House officials whether he should fire Mr Powell over concerns about the soaring costs of plans to renovate the Federal Reserve's headquarters in Washington D.C.
05:45 PM BST
Donald Trump claims Jay Powell is keeping interest rates high for 'political reasons'
Donald Trump has renewed attacks on Jay Powell by claiming the chairman of the Federal Reserve has kept interest rates high for 'political reasons'.
Speaking from the White House, Trump called Mr Powell a 'numbskull' over concerns that America's 4pc interest rates are 'causing a problem for people that want to buy a home'.
'He keeps the rates too high and probably doing it for political reasons. The only time I remember him cutting rates, I mean he cut the rates just before the election to try and help Kamala.'
'I think he's done a bad job,' Trump added. 'I call him too late. He's too late all the time. He should have lowered interest rates many times. Europe lowered their rates 10 times, we lowered ours none.'
'Look, our economy is so strong now we're blowing through everything, we're setting records... But you know what, people aren't able to buy a house, because this guy is a numbskull.'
Speaking at a meeting with Ferdinand Marcos Jr., the president of the Philippines, Trump also called on Mr Powell to cut interest rates to 1pc.
'We should be at 1pc we should be leading the word. Instead we're paying 4pc and if you look at what that means, that's over a trillion dollars of interest that we have to pay... With a striking of a pen we would be saving more than one trillion dollars.'
03:57 PM BST
Reeves refuses to rule out wealth tax
Rachel Reeves has refused to rule out a wealth tax, despite Lord Lamont, who served as Chancellor in the 1990s, warning that speculation risks undermining confidence in the economy.
'I still find it a bit strange the Government has not ruled out a wealth tax which some people in your party have been proposing,' said Lord Lamont, referring to former Labour leader Neil Kinnock's demands for a levy on the rich.
'Though I understand your reluctance to rule things out, you did before you took office rule out certain increases in taxation, you were quite explicit about that. Surely just the whiff or suspicion of a wealth tax is rather undermining confidence, or carries the risk of undermining confidence, so wouldn't it be far better just to rule it out?'
The Chancellor declined the opportunity.
'In our manifesto we made a commitment around the key taxes that working people pay, income tax, national insurance and VAT,' she said, skirting around her Budget decision to raise National Insurance Contributions made by employers.
'But you will know from your own experience, Lord Lamont, that if you start saying no to other taxes, as soon as you don't say no, people will assume that is the one you are going to increase.
'So it is right, and with respect this is what you would have done and did do in my position, you rightly said tax is a matter for the budget and we will set out our policy there.'
03:19 PM BST
Reeves says welfare rebellion has forced Britain to 'rely on kindness of strangers'
Rachel Reeves said Britain was 'reliant on the goodwill of strangers' to keep its debt market afloat after the Government's U-turn on cuts to welfare spending.
The Chancellor said she expected £5bn to face a £5bn cost as a result of the decision to back down to backbench rebels over cuts to Personal Independence Payments, known as Pip.
She said this meant the Government had to borrow more and spend more on servicing that debt, which was money she would rather spend on 'health service, or on our defence or on better schools for our children'.
The Chancellor told the House of Lords Economic Affairs Committee: 'Of course there is a cost for the changes on the welfare bill.
'The OBR will do their costings in the autumn and will set that out, probably to the tune of £5bn. But we've restated our commitment to the fiscal rules. Those rule are non-negotiable because it is the fiscal rules that provides that stability that underpins a successful, thriving, prosperous economy, and gives government bondholders the confidence to carry on buying.
'We are still very reliant on the goodwill of strangers in buying our government bonds. One in £10 of spending is spent servicing government debt. I'm a Labour politician. I don't think there's anything progressive about spending £100bn a year, often to US hedge funds, when I'd rather spend that money on the health service, or on our defence or on better schools for our children.
'That is why I am going to stick to those fiscal rules so we can bring down the costs of servicing that debt.'
03:04 PM BST
Reeves: Companies should not always use immigration to fill vacancies
Bosses should not keep resorting to immigration to fill job vacancies, the Chancellor has said.
Rachel Reeves told peers that 'there are a lot of people here in Britain who are not working either because they are unemployed or because they are economically inactive'.
She said: 'We've got 20pc of people who are of working age who are economically inactive and we've got an unemployment rate of just over 4pc.
'So I do not think that businesses should always resort to the immigration lever to fill vacancies.
'We need to do much more to train up people who are already in this country.
'There are those 650-700,000 vacancies in the economy. There are plenty of people of working age in the economy. With the right support they should be able to work.'
02:43 PM BST
Investment is answer to economic woes, says Chancellor
Rachel Reeves said the key problem faced by the UK economy was 'productivity', adding 'investment is the answer'.
The Chancellor told peers Britain needed 'investment in human capital, investment in physical capital, and also investment in new technologies'.
She told the House of Lords Economic Affairs Committee: 'We've got the lowest private investment and the lowest total investment as a share of GDP of any country in the G7.
'The result of that is our productivity performance has not kept pace with our competitors and similar countries around the world.
'That's why the fiscal rules that I've set out do treat investment spending different, because what you saw... was public investment as a share of GDP fall to 1.7pc. We are instead going to keep it at 2.5pc.'
She added: 'The easy thing to do as a Chancellor is to cut capital spending because, frankly, you're not likely to be the government that sees the full benefit of that capital spending but we're not going to keep making those short-sighted wrong decisions, which is why we've set out those changes to the fiscal rules.'
02:16 PM BST
Reeves facing 'difficulty getting things done' in growth push
Rachel Reeves urged members of the House of Lords to speed up their approval of planning reforms as she complained of facing difficulty 'getting things done'.
The Chancellor pointed to 'wide ranging' reforms of the planning system and other areas of government as a key pillar of her strategy to rekindle growth in the economy.
She said: 'The Planning and Infrastructure Bill is before your house at the moment and I would encourage lords, when they are looking at that bill, to think about how quickly we can get it signed into law.
'Because the quicker we can do that, the quicker we can actually get things building in Britain again.
'One of the big challenges we've faced – and it is a similar challenge to other countries as well – is the difficulty in actually getting things done, whether it is building transport infrastructure, energy infrastructure, the homes that we need, the digital infrastructure that is so important now with the growth of data centres and technology and AI.'
01:58 PM BST
Reeves to appear in front of Lords committee
Rachel Reeves will be questioned by the House of Lords Economic Affairs Committee from 2pm.
Peers will get the chance to ask the Chancellor about the latest borrowing figures and her first year at the Treasury.
01:49 PM BST
Rising borrowing 'makes tax rises inevitable'
Rachel Reeves is 'almost certain' to announce tax rises in the autumn after official figures showed Treasury borrowing hit a record high for June outside the pandemic, a think tank has said.
The Chancellor would be unlikely to relax her fiscal rules to balance the books as this 'would risk an adverse market reaction, and could make a bad situation worse', said Tom Clougherty of the Institute of Economic Affairs.
He said tax allowances and thresholds would likely be frozen 'for years to come' despite high inflation eroding incomes.
'Many more people are going to end up paying higher rates of tax without getting any richer in real terms,' he said.
'But it seems unlikely that will be enough. The question is whether the Government will drop its core tax pledge, and raise a broad-based tax like income tax, national insurance or VAT, or whether it will attempt another stealth tax raid, targeting businesses and savers.
'Either course risks further depressing a weak economy. The better approach would be to build a consensus renewed spending restraint, while also making a much more concerted effort to pursue cost-free, pro-growth regulatory reforms.'
He added: 'The latest borrowing figures underline what many of us already thought – that the Government is almost certain to announce another set of tax increases at the autumn Budget.'
01:37 PM BST
No need for Fed chief to step down, says Bessent
The US treasury secretary said he sees no reason why the chair of the Federal Reserve should step down, following a flurry of attacks from Donald Trump.
Scott Bessent said Jerome Powell should see through his term as head of the US central bank 'if he wants to'.
Mr Bessent's comments come a day after he called on the Fed to conduct an exhaustive review of non-policy areas of operations, following accusations that there had been mismanagement of a costly renovation of the Fed's buildings.
Mr Powell has faced repeated attacks from President Trump for the Fed's refusal to cut interest rates, which the US president said was costing the US billions of dollars.
However, Mr Trump rowed back on threats to axe Mr Powell after a spike in borrowing costs on bond markets, signalling concerns about the independence of the Fed.
Mr Bessent, who has been tipped as a potential successor to Mr Powell, told Fox News: 'There's nothing that tells me that he should step down right now.
'His term ends in May. If he wants to see that through, I think he should. If he wants to leabe early, I think he should.'
Meanwhile, Federal Reserve vice chair Michelle Bowman said the central bank's ability to set monetary policy without political interference is 'very important'.
She told CNBC: 'It's very important ... that we maintain our independence with respect to monetary policy.
'But we also, as part of that independence, have an obligation for transparency and accountability as well. But we also have an obligation, in my view, as we have throughout my time on the board here since 2018, to listen to a broad range of voices to understand how others are viewing the economy and how that should influence our decisions in monetary policy making.'
01:04 PM BST
US stocks subdued ahead of earnings
Wall Street slipped in premarket trading as investors geared up for a whirlwind day of company results.
US stocks have begun to show the first signs of being impacted by Donald Trump's tariffs.
General Motors saw its second-quarter core profit tumble 32pc to $3bn (£2.2bn), blaming steep tariff costs for shaving $1.1bn from its bottom line.
The company's shares lost 3.5pc in premarket trading, while Ford also dropped 1pc.
Meanwhile, Coca-Cola rose 1pc after beating second-quarter revenue estimates.
Despite trade policy uncertainty out of Washington, the US economy's resilience has propelled major indexes to fresh all-time highs.
In premarket trading, the Dow Jones Industrial Average and Nasdaq 100 were down 0.1pc and the S&P 500 was flat.
12:41 PM BST
National debt near 96pc of GDP
Public sector net debt, excluding public sector banks, stood at £2.87 trillion at the end of June, according to the ONS.
This was estimated at 96.3pc of gross domestic product (GDP), which was 0.5 percentage points higher than a year earlier.
It remains at levels last seen in the early 1960s.
11:59 AM BST
Reeves's biggest Budget headache is not Starmer's welfare reversal
Embarrassing about-turns on welfare and winter fuel payments may be fuelling speculation of an autumn tax raid. But public borrowing data on Tuesday show that policy changes are far from Rachel Reeves's biggest problem.
The cost of servicing Britain's £2.7tn debt pile almost doubled in June compared with a year ago to £16.4bn as higher-than-expected inflation pushed up debt costs.
The Office for National Statistics (ONS) said this was the second-highest interest bill since monthly records began in 1997, eclipsed only by June 2022 just after Vladimir Putin invaded Ukraine.
It meant the Government had to borrow £20.7bn in June to plug the gap between tax receipts and revenues. That is much higher than a year ago and £3.5bn more than forecast by Britain's tax and spending watchdog in the spring statement.
11:40 AM BST
Scrapping bank ring-fencing 'not sensible', warns Bailey
The Governor of the Bank of England said it 'would not be sensible' for the Government to scrap the bank ring-fencing regime, after Rachel Reeves announced plans to reform the system last week.
Andrew Bailey also stressed that the UK cannot 'compromise' on financial stability amid the Treasury's plans to rip up red tape across the sector.
'I do think the ring-fencing regime is an important part of the structure of the banking system,' he told MPs on the Treasury Select Committee.
'It makes the resolution of banks if they're in trouble much easier, and it benefits, particularly in terms of the UK, consumers, business and households.
'I'm sure there are things that can be improved and we will work constructively to get through that process.'
'I think it has established itself as part of the system and to me it would not be sensible to take it away at this point,' he clarified.
The ring-fencing regime was brought in after the 2008 financial crisis to separate banks' retail and investment banking activities.
11:40 AM BST
Scrapping bank ring-fencing 'not sensible', warns Bailey
The Governor of the Bank of England said it 'would not be sensible' for the Government to scrap the bank ring-fencing regime, after Rachel Reeves announced plans to reform the system last week.
Andrew Bailey also stressed that the UK cannot 'compromise' on financial stability amid the Treasury's plans to rip up red tape across the sector.
'I do think the ring-fencing regime is an important part of the structure of the banking system,' he told MPs on the Treasury Select Committee.
'It makes the resolution of banks if they're in trouble much easier, and it benefits, particularly in terms of the UK, consumers, business and households.
'I'm sure there are things that can be improved and we will work constructively to get through that process.'
'I think it has established itself as part of the system and to me it would not be sensible to take it away at this point,' he clarified.
The ring-fencing regime was brought in after the 2008 financial crisis to separate banks' retail and investment banking activities.
11:25 AM BST
Bailey warns over global financial crisis as Reeves pushes for growth
Andrew Bailey issued a thinly veiled warning to Rachel Reeves not to pursue growth at the expense of regulation as the Chancellor seeks ways to boost the economy and rebalance the public finances.
The Governor of the Bank of England insisted 'there isn't a trade off between financial stability and growth' days after Ms Reeves addressed banking leaders in her Mansion House speech.
The Chancellor said red tape is a 'boot on the neck of businesses' and risks undermining the UK's dash for growth, as she urged Britain's regulators to ditch their 'excessive caution'.
Mr Bailey said: 'I can understand when I hear people say 'the financial crisis is now way in the past, we've got passed that, that's all solved, that's all out of the way, move on'.
'For those of us who were veterans of sorting the problems of that out, I think we probably all feel in some ways were in different parts of the world, erm... no.
'Yes of course the world moves on. That was the experience of losing financial stability. We had a very serious recession in this country after that. So I do react to people who say that because, I'm sorry, this is the fundamental point about why financial stability is important.'
He added: 'Success in financial stability is when nothing happens. The fact we've had market volatility this year and we haven't had a financial stability problem and we're not worrying about banks failing, we're not the market, is of course a success.
'It's not always easy to point to it and say, look, this is good news. But the UK banking system is very resilient.'
Asked about the Chancellor's suggestion that red tape is a 'boot on the neck of businesses', he said: 'It's not a term I'd use.'
11:08 AM BST
Bailey 'not unconcerned' by rising UK borrowing costs
The Governor of the Bank of England said he was 'not unconcerned' by increased Government borrowing after official figures showed higher-than-expected borrowing across UK state finances last month.
Andrew Bailey said the 'yield curve has steepened' referring to higher longer-term borrowing costs on bond markets.
He told the Treasury Committee: 'The cost of borrowing has increased, the yield curve has steepened, but the important thing to say is that it is a global phenomenon.
'If anything, the pattern in the UK is in line with other markets and we have even seen steeper increases in other markets.
'What are the causes? In the short run it is greater uncertainty on two fronts.
'There is uncertainty on the trade front and uncertainty globally around fiscal policy.
'I'm not unconcerned but it's reflective of conditions.'
11:00 AM BST
Bailey warns of switch away from US dollar
Andrew Bailey said the Bank of England was watching closely as markets move away from dollar-based assets amid Donald Trump's tariff war.
The Governor said markets were going through a 'major change', adding the 'most crowded trade' was the expected depreciation of the dollar.
The pound has climbed nearly 8pc against the US currency so far this year, while the euro has gained 13pc amid the turmoil caused by Mr Trump's trade policy.
Mr Bailey told the Treasury Select Committee that he expected a 'breakdown in established correlations in markets' to go on for a long time as long term investors take time to change their positions and the trade war continues.
He said: 'It does depend on how the whole trade and tariff story plays out. We're not through it yet. We don't know much for certain but that's probably one thing we do know for certain.'
He told MPs: 'We sense there's rebalancing going on which involves a reduction in exposure to dollar assets over time.'
10:28 AM BST
Bailey blames rising borrowing costs on 'greater uncertainty'
Andrew Bailey said the recent increase in long-term government borrowing costs was due to 'greater uncertainty'.
The Governor of the Bank of England told MPs today that the increase in bond yields – a benchmark for the cost of servicing national debts – was a 'global phenomenon'.
Appearing in front of the Treasury Select Committee, he said bond yields were rising due to uncertainty on trade policy, amid Donald Trump's global tariff war.
He added that uncertain fiscal policy had also pushed up debt costs amid a shift 'towards greater government borrowing' over the last 10 years.
09:57 AM BST
Housebuilders slump amid rise in borrowing costs
Housebuilders' shares were hit by the surge in Treasury borrowing, amid doubts about interest rate cuts.
Developers across the FTSE 100 and FTSE 250 slumped 1.2pc, with Vistry down 1.8pc and Barratt Redrow down 1.6pc.
It comes after the surge in Government borrowing pushed up yields of UK debt on bond markets.
Russ Mould, investment director at AJ Bell, said: 'Housebuilders were knocked by the public sector finance figures as the rise in gilt yields suggests the market believes interest rates could stay higher for longer.
'Housebuilders are desperately waiting for rates to come down as that could make mortgages more affordable and help more people get on the property ladder.'
The FTSE 100 was down 0.1pc in early trading, while the domestically-focused FTSE 250 fell 0.3pc.
09:39 AM BST
UK borrowing costs rise at faster pace than major economies
The cost of government borrowing has continued to rise at a faster pace for Britain today than other major economies.
The yield on 10-year UK gilts – a benchmark for the cost of servicing the national debt – has jumped four basis points to 4.64pc.
Britain's borrowing costs were rising faster than global rivals on bond markets.
Germany's 10-year bund yield was up two basis points to 2.63pc while 10-year US treasury yields were up one basis point to 4.39pc.
09:11 AM BST
Pound slips as Reeves expected to raise taxes
The value of the pound declined as Rachel Reeves was expected to raise to raise taxes after the Treasury overshot borrowing forecasts last month.
Sterling was down 0.1pc against the dollar to $1.348 and dropped by 0.1pc versus the euro at €1.153 as borrowing hit a record high in June, excluding the pandemic.
Alex Kerr of Capital Economics warned that 'things will probably get worse for the Chancellor'.
He said: 'The Government's U-turns on spending cuts and potential upward revisions to the OBR's borrowing forecasts means the Chancellor will probably need to raise £15-25bn at the Autumn Budget to maintain the £9.9bn of headroom against her fiscal mandate.
'And given that she is struggling to stick to existing spending plans and we doubt the gilt market will tolerate significant increases in borrowing, she will probably have to raise taxes instead.'
08:38 AM BST
Government borrowing costs jump as public finances 'exposed'
The cost of government borrowing jumped higher today after the latest figures showing the Treasury borrowed more than expected last month.
Investors sold bonds – which offer a benchmark for the cost of servicing the national debt – after official data indicated Britain's borrowing surged to a June record excluding the pandemic.
The yield on 10-year gilts climbed nearly three basis points to 4.63pc, which was the sharpest rise across the world's major economies.
Rising gilt yields mean the government has to pay higher returns to buyers of its debt.
The ONS said Britain's debt interest costs nearly doubled in June, mainly as a result of so-called index-linked gilts, which are government bonds offering returns tied to the rate of inflation.
Nabil Taleb, economist at PwC UK, said: 'Higher debt servicing costs as a share of total revenues leave the public finances more exposed to future economic shocks.'
The rate of inflation has climbed in recent months, with the situation made worse by the fact bonds are linked to the retail prices index (RPI), a now discredited rate of inflation which is higher than the official designated consumer prices index (CPI).
RPI was 4.4pc in June, compared to 3.4pc for CPI.
08:13 AM BST
Reeves to impose 'sin taxes' and raid pensions to cover surging borrowing
Rachel Reeves will raid pensions and impose 'sin taxes' to deal with a £20bn black hole in the public finances this autumn, economists have said.
Pantheon Macroeconomics predicted the Chancellor's £9.9bn of headroom left in the public finances in spring would be wiped out by the time she delivers her Budget, with an extra £13bn needed on top of that.
Chief UK economist Rob Wood said Ms Reeves has a 'major problem' created by U-turns on previously planned spending cuts and possible downgrades to OBR growth forecasts.
He said: 'We expect 'sin tax' and duty hikes, freezing income tax thresholds for an extra year in 2029 and a pensions tax raid —reinstating the lifetime limit on pension pots and cutting relief — to fill most of the hole.
'The majority of those tax hikes would be backloaded to the end of the forecast horizon, avoiding fiscal tightening in the near-term.
'Sitting between a rock and a hard place — of wanting to avoid tax hikes but being unable to cut spending — Ms Reeves could tweak the fiscal rules to allow a forecast deficit of 0.5pc of GDP, giving another £17bn of headroom.
'The fiscal pain will, however, continue beyond the autumn. Defence spending will almost certainly have to rise faster than the government currently plans, for instance, necessitating further tax hikes or rule tweaks.'
08:02 AM BST
UK stocks fall after as borrowing costs surge
Stock markets in London made a lacklustre start to trading after official figures showed rising Treasury borrowing, which make tax rises almost certain later this year.
The FTSE 100 declined 0.2pc to 8,999.11 while the mid-cap FTSE 250 slipped 0.1pc to 22,001.27.
07:49 AM BST
Reeves 'spending money she doesn't have', say Tories
The shadow chancellor said the higher-than-expected rise in Government borrowing proved Rachel Reeves is 'spending money she doesn't have'.
Mel Stride said: 'Debt interest already costs taxpayers £100bn a year – almost double the defence budget – and it's forecast to rise to £130bn on Labour's watch.
'Labour's jobs tax and reckless borrowing is killing growth and fuelling inflation – paving the way for more tax hikes and more borrowing in the autumn. Make no mistake – working families will pay the price for Labour's failure and costly U-turns.
'Only the Conservatives, under new leadership, will break this cycle. Only the Conservatives believe in sound money and low taxes.'
Shadow business secretary Andrew Griffith added: 'This level of borrowing is not remotely 'unexpected' given the out of her depth Chancellor.
'She is no more capable of balancing her books than a first year undergrad in freshers week.'
07:42 AM BST
Rising debt costs outweigh National Insurance raid
The jump in the cost of servicing the national debt outweighed the returns for the Chancellor from her National Insurance raid, the ONS said.
Rachel Reeves's changes hikes to employer National Insurance contributions raked in an extra £3.1bn in June, taking the total 'compulsory social contributions' for the month to £17.4bn.
However, this was dwarfed by an £8.4bn jump in the cost of central government debt to £16.4bn, mainly as a result of bonds linked to the rate of inflation.
ONS acting chief economist Richard Heys said: 'Borrowing in the month of June was over £6bn higher than during the same month last year.
'The rising costs of providing public services and a large rise this month in the interest payable on index-linked gilts pushed up overall spending more than the increases in income from taxes and National Insurance contributions, causing borrowing to rise in June.'
07:32 AM BST
Surging debt interest costs 'piles more pressure' on Reeves
Government debt interest payments were the second highest for June since monthly records began in 1997, heaping more pressure on the Chancellor.
The Treasury paid £16.4bn in debt interest costs, which was £2.4bn more than the OBR predicted would be the case back in March.
Dennis Tatarkov, senior economist at KPMG UK, said higher borrowing 'piles more pressure on public finances'.
He said: 'Higher than expected interest payments as well as weaker revenues have pushed borrowing above the OBR's projection for the second month in a row.
'Furthermore, the longer-term outlook for public finances remains difficult. Recent U-turns on welfare and persistent growth headwinds could open a gap against fiscal targets, which could require further tax rises or spending cuts in the autumn Budget.
'To the extent that ongoing deficits point to lingering budgetary pressures, we would expect the OBR to acknowledge these at the next fiscal event.'
07:22 AM BST
Treasury committed to fiscal rules, says minister
The Treasury remains committed to the 'tough fiscal rules' set by the Chancellor, a minister has said, making tax rises more likely in the Budget.
Chief Secretary to the Treasury Darren Jones said: 'We are committed to tough fiscal rules, so we do not borrow for day-to-day spending and get debt down as a share of our economy.
'This commitment to economic stability means we can get on with investing in Britain's renewal, including fixing our NHS, strengthening our national defence and building hundreds of thousands of affordable homes through our Plan for Change.'
07:18 AM BST
Treasury borrowing costs surge amid rising inflation
The Treasury in June paid nearly double the level of interest payments on its debt than compared to the same month last year, official figures show.
The interest payable on central government debt jumped from £8.4bn in June last year to £16.4bn last month, mainly as a result of rising inflation, which pushed up the returns it must pay on index-linked gilts.
The Treasury has borrowed £57.8bn so far this financial year, the ONS said, which was £7.5bn more than the same period last year.
07:04 AM BST
Good morning
Thanks for joining me. The Treasury borrowed more than official forecasts last month, cementing the case for Rachel Reeves to raise taxes in the autumn.
Public sector net borrowing rose by £20.7bn in June, according to the Office for National Statistics (ONS), which was the highest figure for the month on record excluding the pandemic.
It meant the Treasury borrowed £3.5bn more than the £17.1bn that had been forecast for the month by the Office for Budget Responsibility (OBR). Borrowing was £6.6bn higher than the same month last year.
So far this financial year, public sector borrowing hit £57.8bn, which was in line with the OBR forecast.
The Treasury in June paid nearly double the level of interest payments on its debt compared to the same month last year, mainly as a result of bonds linked to the rate of inflation, which has climbed in recent months.
It comes as economists warned the Chancellor she faces a potential £30bn black hole in the public finances when she comes to deliver her Budget later this year.
Ms Reeves has said repeatedly that she is committed to her fiscal rules and would not reopen departmental spending budgets, leaving her with little option but to raise taxes to keep the nation's finances in order.
She has faced pressure from backbenchers to impose a wealth tax, while Angela Rayner is pushing for councils to be given new powers to tax tourists. Here is what you need to know.
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What happened overnight
Asian share markets drifted lower after scaling a near four-year peak ahead of an onslaught of corporate earnings.
MSCI's broadest index of Asia-Pacific shares outside Japan hit its highest level since October 2021 in early Asian hours but was last down 0.4pc. The index is up nearly 16pc this year.
The S&P 500 and the Nasdaq notched record-high closes on Monday.
The Japanese markets returned to action after a holiday on Monday following the weekend's election where the ruling coalition suffered a defeat in upper house elections, although Prime Minister Shigeru Ishiba vowed to remain in his post.
Japanese shares briefly jumped at the open but reversed course to trade lower by Tuesday afternoon, as the election results were largely priced in and were not as bad as investors had feared.
The yen rallied 1pc on Monday, recouping some of the losses from past weeks and was last slightly weaker at 147.73 per dollar.
On Wall Street, the Dow Jones Industrial Average fell less than 0.1pc, to 44,323.53, the S&P 500 rose 0.1pc, to 6,305.68, and the Nasdaq rose 0.4pc, to 20,974.18.
In the bond market, the yield on benchmark 10-year US Treasury notes fell to 4.387pc from 4.423pc late on Sunday.
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