MORE austerity is on the agenda as Chancellor Rachel Reeves prepares a new clampdown on public spending in her autumn Budget.

In a move that risks sparking new divisions and struggle within the labour movement, Ms Reeves is set to prioritise reassuring global money markets over repairing the damage done by the Tories.

She is reported to have been spooked by figures showing public sector borrowing at £3.1 billion in July, £1.8bn more than a year previously and above most expectations.

However, borrowing has fallen over a longer time-frame, but Ms Reeves will pay more attention to the short-term figures and use them as a reason to impose more austerity.

Her deputy, Chief Secretary to the Treasury Darren Jones, said that the “figures are yet more proof of the dire inheritance left to us by the previous government.

“A £22bn black hole in the public finances this year, a decade of economic stagnation and public debt at its highest level since the 1960s,” he added.

The government has bet on raising Britain’s growth rate, despite warnings that this could not happen soon enough to avoid either further spending cuts or tax rises. Both may now be included in the Budget.

Isabel Stockton from the Institute for Fiscal Studies said: “The early signs are that better than expected growth figures won’t be enough to save Rachel Reeves from tough choices in her first Budget on October 30.

“The combination of in-year spending pressures identified at last month’s spending audit and the ongoing and well known pressures facing many public services suggest that the accompanying spending review for 2025-26 could be a particularly difficult exercise.”

Unite general secretary Sharon Graham has called for a shift in priorities, saying: “We are the sixth-richest economy in the world, where the 50 richest families are worth £500bn. 

“It is clear, irrespective of ‘black holes,’ that we need to consider a wealth tax.”

And more than 10,000 people have backed a petition calling on the government to change course and scrap the two-child cap, while reinstating the whip to the seven Labour MPs who were suspended from the parliamentary party after voting for its removal last month, Labour Outlook reported.