Rachel Reeves was handed a £3billion boost yesterday when it was revealed that borrowing figures had been overstated.
The Office for National Statistics (ONS) said errors in VAT numbers supplied by HM Revenue and Customs (HMRC) had affected public sector finance figures from January to August.
Correcting the error would reduce borrowing – the difference between tax receipts and spending – by £1billion for the financial year to the end of March 2025 and by £2billion for the current year.
The blunder is the latest embarrassing failure for Britain’s official statisticians.
While this time the finger was pointed at HMRC, it comes after errors in ONS retail sales, unemployment and inflation data.
Rob Wood, chief UK economist at Pantheon Macroeconomics, said it showed official figures must be taken ‘with a pinch of salt for now’.
Balancing act: Chancellor Rachel Reeves must find a way to fill an estimated £30bn black hole in the public finances at next month’s Budget
But it is a rare slice of good fortune for the Chancellor, who must find a way to fill an estimated £30billion black hole in the public finances.
It follows setbacks such as a downgrade in productivity estimates that some fear could cost £18billion.
Deutsche Bank chief economist Sanjay Raja said: ‘The impact is very modest. It won’t move the dial much.’
Experts believe tax hikes are inevitable – a fear causing huge anxiety among firms already battered by last year’s Budget.
The poll of bosses by the Institute of Chartered Accountants (ICAEW) in England and Wales showed confidence at a three-year low, with a record 60 per cent of firms worried about the tax burden.
ICAEW chief executive Alan Vallance said: ‘Concerns over further tax rises next month, which appear inevitable, are quashing any sparks of risk-taking or ambition.
If the Government is to come good on its growth mission it must demonstrate it is firmly on the side of business by cultivating conditions in which they can thrive, beginning with a cast-iron commitment not to increase business taxes.
‘If it fails to do that, Britain risks sleepwalking into stagnation.’
Elsewhere, bond market heavyweights Pimco and BlackRock said merely putting the public finances back in the shape they were in earlier this year – leaving the Chancellor with a slim £9.9billion in headroom – would not be enough.
Andrew Balls, chief investment officer at Pimco, told the Financial Times: ‘We would think it would make sense to have more of a buffer.’
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