This pre-Budget report is a shocker for Rachel Reeves and Britain

In short, the Tories have spent all the money, have been borrowing up the hilt and still managed to run down the country to a terrifying degree. The implications are huge and seriously worrying. 

The IFS thinks departmental spending will have to be topped up by £14 billion by 2028-9 and by £30 billion if we want to avoid any spending cuts elsewhere. 

Improving public services like local government, the prison system and police will take another £47 billion by 2028-9 – and that is if the gods are generous and “growth, inflation and much else” stay on track. 

The government’s finances are basically “on a knife-edge”. Remember that next time Jeremy Hunt tells us, once again, that everything was fine when he was chancellor. 

As for the possibility of changing the fiscal rules to give Rachel Reeves more room to borrow, that won’t make much difference and will only be possible with tax rises and very large tax rises at that. 

But those are just the headline figures. The longer-term trends are also stacked against the government. 

As the IFS puts it, “most spending pressures stem from the fact that the generosity of departmental budgets has become detached from what those departments have been asked to deliver”.

Let’s be equally honest about where we are. We have been living in a fool’s paradise for years.

Austerity has not saved money it has been a disaster. Inflation has also been higher than forecast, debt interest, pension and benefit bills are all much higher than predicted and the government must put up with lower fuel duty and tobacco revenues in future, all while spending on the NHS will continue to increase. 

It is a vicious circle, which the Tory government was well aware of and ignored for years. Research from Citi in conjunction with the IFS makes that all too clear. 

It has found that “UK economic activity is 36% lower than it would have been had it continued to grow in line with trend growth before the financial crisis” A much worse performance than the USA or even the Eurozone, and this trend has got worse since the pandemic.

“GDP in the UK is now 6.1% short of its pre-pandemic trajectory, compared with 4.3% in the Euro Area,” it says. Just think what we could do with that missing growth and tax revenue? 

It would be nice to think that like Mr Micawber the Tories were just hoping that “something would turn up” but in fact they drove the country into the ground and walked off humming with a cheerful “Nothing to do with us, mate”.

Reeves is therefore not to be envied. She has to raise taxes by a huge amount just to stop the rot, borrow more if she can, and rewire the whole economic model, with Brexit standing like Banquo’s ghost over the whole affair. 

But without radical change the UK is going to stay in permanent, disastrous, unaffordable and very painful long-term decline. 

No pressure, Rachel.