SIR John Redwood has predicted that the government will raise taxes again to pay for higher rates of borrowing and an increase of £1.3 trillion in debt.
Speaking on GB News he said: “[The refinancing of money] doesn’t add to the stock of debt, but you have to repay it, and then you’ve got to go to the market and borrow it all over again.
“So it was as if you were there with your mortgage, and suddenly you had to repay your mortgage. And at the same time, you went to the bank manager and said, I want an overdraft to buy a new car on top and you’ve got to look at both of them.
“And the bank manager might just say, hold on a minute. If I’m going to help you with the refinancing, I’m not going to give you all that mortgage.
“I’m very concerned about [crowding out] because then the previous government borrowed an awful lot over covid and the Ukraine energy crisis, which all parties wanted them to do, but it was an awful lot of borrowing.
Sir John Redwood GB News 4:12.jpg
“They got away with it because the Bank of England was a massive buyer, creating money and buying these bonds at ever higher prices and lower interest rates, and the pension funds were buying more bonds than they could even afford.
“And all of that has changed now. And so we now have a chancellor who needs to raise £1.3 trillion – £628 billion for extra spending and £675 billion to replace retiring debt, a huge amount of money over the next five years.
“The Bank of England is selling them, not buying them, and the pension funds aren’t going to be buying very many because they’re still sorting themselves out because they own too many of them and couldn’t afford them all.
“We are paying more for our debt and borrowing under Rachel Reeves this year than at any point under the worst, even of Liz Truss, for example, because the markets are very worried by the scale of the extra borrowing.
“These are the longer-term interest rates for government to borrow. They’re borrowing for 10,20, 30 years. They’re all higher than they were in October 2022, by quite a decent margin.
“The debt levels are much higher: some of that is covid and the previous government. Some of it is now this government adding to it needlessly and rather dangerously. As a result, we’re having to pay an awful lot more for our borrowing.
“That affects the refinancing as well as the new borrowing. You are retiring old borrowing low interest rates and you’ve got to pay a lot more.
“Inflation has almost doubled under this government, compared with the 2% they inherited.
“You’ll need more tax rises to pay all the extra interest charges. They reckon that the interest bill is going to go through the roof over the next five years in their official figures.”
