Stability and growth. This is what we were promised by the incoming Labour government, alongside a now unravelling pledge that taxes would not be raised for working people.

Having boxed themselves into so many fiscal corners, today’s Budget is going to fall somewhere in the range from painful to agonising. It would be unfair to say that market confidence in the new administration has evaporated, but it already seems to be ebbing away.

We can expect the Chancellor to reel off a whole series of supposedly unexpected time bombs left by the previous government. Given the Government’s annual expenditure of more than £1.2 trillion, finding some examples of waste or financial mismanagement will be child’s play. However, to fret about these so-called black holes is akin to worrying about your house burning down because you left a ten pound note down the back of the sofa.

The root cause of the major headache Rachel Reeves faces as she delivers her statement today is not that she needs to tidy up an almighty mess bequeathed to her by the vanquished Tories, but that our overall approach to the public finances is utterly unsustainable.

Gilt yields are ticking upwards displaying a nervousness about whether the Government has anything approaching a credible fiscal plan. It’s likely – over the medium term at least – that they don’t.

The key failure lies in the working assumption that state expenditure must continue to grow and all other economic furniture needs to be rearranged to meet this objective. Unfortunately, the bald facts of economic life make this a fruitless and dangerous endeavour for four key reasons.

First, taxation and spending are already eye-wateringly high. Government expenditure is likely to account for around 44 per cent of GDP this year, around £42,000 for every household in Britain. Taxation is at the highest overall level since Attlee’s post-war socialist government. This means Rachel Reeves is finding that she risks slipping down the wrong side of the Laffer curve – taxation is now so punitive that ratcheting it still further could even lead to decreasing revenues. 

Already the hoped-for cash injections from scrapping non-dom status and applying VAT to school fees seem largely illusory. No doubt a little more revenue can be found by a gentle squeeze here or a slight tightening there, but we are somewhere very close to maximum government tax receipts already.

Second, living beyond our means has now become the norm. No government of any stripe has presented a balanced Budget since 2001. The modus operandi has been to overspend enormously in the bad times – such during a banking crisis or a global pandemic – and then to continue to overspend, albeit more modestly, in the good times. 

The consequence is that servicing debt now costs more than the state education budget and still further borrowing will become exponentially more costly. Rachel Reeves, like previous chancellors, can still opt for the immediate sugar rush of a large budget deficit, but don’t mistake it for surgery.

Third, the longer-term demographic and accompanying fiscal picture is dire. State promises on future benefits – both the universal state pension and the absurdly gold-plated public sector pensions – are essentially unfunded. An ageing population is going to need ever higher amounts of health and social care provided by a dwindling band of increasingly beleaguered workers still in the labour market. Even if you believe the state’s high spending is just about sustainable for now, it certainly isn’t sustainable for long.

Finally, economic growth is increasingly just prayed for by politicians rather than positively pursued. Keir Starmer claimed that he would be “laser focused” on growth. The laser has yet to be switched on. Many more announcements have been forthcoming that will dampen growth – such as smoking restrictions in pub gardens, tougher employment laws for businesses and still more intervention in the energy market – than will supercharge it. 

But even if you could magically get GDP growth to 3 per cent or 4 per cent per annum this still wouldn’t be close to making the Government’s spending addiction manageable.

A monumental retrenchment of state expenditure is coming at some point and the longer we wait the more painful it will be. Sadly, today’s Budget will simply be another step in the Government gradually running out of road. Even if they have not run out of road entirely just yet, they are chewing through tarmac at an alarming rate.