Rachel Reeves under fire for ‘cooking the books’ in controversial national debt plan

“Rachel Reeves MP’s answer to sky high national debt is not to reduce borrowing but to cook the books. She plans to net off, against national debt, money owed by students to the govt, £236 billion. Most of this will never be repaid. UK Labour will bankrupt the country.”

Chancellor Rachel Reeves is facing a backlash over her proposed strategy to reduce the UK’s national debt.

Instead of cutting borrowing, Reeves plans to offset £236 billion of student loan debt against the national debt—a move critics have slammed as “cooking the books.”

Currently, student loans are considered a financial asset because students are expected to repay them over time. Reeves’s proposal is to include these loans in the calculation of national debt, effectively lowering the overall debt figure. The problem is that a significant portion of these loans will never be repaid due to income thresholds and loan forgiveness policies.

The Office for Budget Responsibility (OBR) estimates that only around 30% of student loans will be fully repaid. By netting off these unpaid loans against the national debt, Labour could be seen as artificially reducing the debt figure without addressing the actual financial liabilities. This has raised concerns that the proposal masks the true state of public finances and could lead to further borrowing, ultimately risking the country’s financial stability.

Ben Habib, the former Co-Deputy Leader of Reform UK stated:

“Rachel Reeves MP’s answer to sky high national debt is not to reduce borrowing but to cook the books. She plans to net off, against national debt, money owed by students to the govt, £236 billion. Most of this will never be repaid. UK Labour will bankrupt the country.”

Economists warn that such accounting tactics could undermine confidence in the UK’s fiscal policy. If international markets perceive this as a lack of transparency, it could lead to higher borrowing costs and reduced investment in the UK. Critics argue that this approach does nothing to address the underlying issue of high public spending and could result in a debt spiral that would be difficult to reverse.

Labour’s proposal has sparked fears that it could set a dangerous precedent for future governments, encouraging them to use similar creative accounting methods to paint a rosier picture of the nation’s finances. With the UK’s national debt already at record levels after Covid, many believe that genuine spending cuts and reforms are needed, rather than relying on what some are calling “fiscal sleight of hand.”