Budget will unveil £70billion borrowing to pay welfare bill, City experts warn

Published: 23:35 BST, 24 October 2026 | Updated: 00:42 BST, 25 October 2026

The Chancellor will unveil plans for an extra £70billion borrowing binge to pay for surging debt interest and welfare costs, City experts predicted on Saturday night.

They suggest John Healey is set to duck big spending decisions on defence, benefits and social care in his maiden Budget on Wednesday but hit banks and gambling firms with higher taxes instead.

He has also vowed to give households and firms 'breathing space' by cutting VAT on electricity bills and freezing fuel duty.

But to balance the books, Mr Healey will have to borrow tens of billions more than the Office for Budget Responsibility (OBR), the official forecaster, pencilled in just seven months ago.

Since then, the Middle East conflict has sent oil and gas prices soaring, leaving the Chancellor with around half the £24billion of 'headroom' – or buffer against future shocks – bequeathed to him by his predecessor, Rachel Reeves.

Inflation hit an 11–month high of 3.5 per cent last month, the national debt topped £3trillion for the first time and the Government's monthly debt interest bill reached £10.9billion – the highest on record. 

That left borrowing – the difference between what the Government spends on public services and raises in tax – £6billion more than the OBR thought in the spring.

Higher borrowing than projected by the OBR will 'almost certainly' add another £70billion to public sector net debt by 2031–32, said Sanjay Raja, chief UK economist at Deutsche Bank.

Chancellor John Healey is reportedly preparing to borrow an additional £70 billion over the coming years to cover rising government debt interest and welfare costs

Mr Healey needs to convince investors that key decisions delayed until next year – such as lifting military spending to 3 per cent of GDP by 2030 and curbing the runaway benefits bill – 'will be funded responsibly', Mr Raja added. 

'The key question is not what the Chancellor does on Wednesday but whether he builds a credible bridge to the fiscal choices that follow,' he said.

Mr Healey hopes to calm febrile financial markets by meeting his fiscal rule of national debt falling as a proportion of GDP – or annual output – by the end of the decade.

He also plans to exploit flexibility in the fiscal rules to give a £20billion boost to the state–owned British Business Bank and National Wealth Fund. 

The extra borrowing, which is allowed under the fiscal rules if it boosts investment, will not begin for several years to keep bond markets calm, the Financial Times reported.

It has also emerged that another top financier has quit the country amid concerns over Britain's rising tax burden, which is at its highest level since the late 1940s.

Michael Sherwood, a former boss at investment bank Goldman Sachs, recently moved to Jersey and has become tax–resident on the island, Sky News reported.

He joins the recent exodus by some of Britain's wealthiest individuals, including hedge–fund billionaire Chris Rokos, who has moved his tax residency to Greece ahead of the Budget.