Britain has never experienced a Budget build-up quite like this before. The reason is simple: the lenders upon whom the Government relies to cover its constant annual shortfalls are showing signs of getting nervous about the long-term solvency of the British state. And Labour has found itself politically unable to get a grip on spending.

We have already seen one prime minister felled by skittish bond markets, closing off a possible route out of the problem by going for supercharged growth induced by tax cuts. Given that Labour backbenchers will not allow the party to cut spending, Chancellor Rachel Reeves will instead have to raise taxes. Indeed, she has spent the last eight months trailing increasingly alarming suggestions about how she might do so.

At the same time, HM Treasury is desperately doing whatever it can to get the Office for Budget Responsibility to upgrade productivity and growth forecasts. This would create some breathing room in the self-imposed constraints within which the Government can borrow without frightening the markets. A necessary step here would be manipulating some of the very simplistic mechanisms which the OBR uses to make its forecasts — one of which is immigration. The computer is very clear: migrants coming in means the red line goes up.

Low-skill immigration can be very useful for limiting short-term costs on the Government’s books: for example, care workers arriving from Africa help reduce upward pressure on wages in sectors that are mainly Government-funded. In the long term, the costs of each worker may well outweigh the short-term benefit substantially, especially if these people bring in dependents, or are within 15 to 20 years of retirement themselves.

Such workers will never come anywhere near reaching the level of income at which a British taxpayer “breaks even” for the Treasury, given the various benefits to which they’re entitled. But these long-term costs are not picked up by the OBR’s models, which merely look at headline GDP and productivity. And in the absence of any better ideas, holding down wages is great for productivity figures on paper.

So Britain finds itself in the bizarre position where the Government may be loading up on unsustainable long-term costs in order to placate the nerves of investors whose interests are really in the solvency of the state over decades.

All of this comes down to credibility. A government that had credibility could say that the OBR was a gimmick brought in by George Osborne to rebuke the legacy of Gordon Brown, and that its projections were spurious and fed by simplistic assumptions. A government that had credibility could turn round to its backbenchers and taxpayers and the public, and say that spending cuts and tax rises now were worth it for the better society they were going to build in the long run.

But as with Rishi Sunak’s government before it, Keir Starmer’s ministry has no such credibility. Anything it does on this matter will be perceived by critical parties — lenders, MPs, voters and taxpayers — as trying to shaft them. And against this government, it is taxpayers who have the weakest hand — so it is they who will pick up the bill.

Cutting low-skill immigration is one area where the Government really does have room to manoeuvre, if it were capable of making the case that it would actually reduce the long-term liabilities of the state. It would buy the kind of goodwill from the public which might make them consider current spending cuts and tax rises as being worth it. And it would send investors the message that it was serious about the kind of back-loaded liabilities which could really render the state insolvent.

But to do so would require Labour and the civil servants in the Treasury and the OBR to break with decades of orthodoxy that immigration is an untrammelled economic benefit, and that opposition is driven by bigotry and sentimentality. This would require the kind of political strategy and intellectual clarity that Starmer and his ministers have so far shown to be completely beyond them. It’s far easier to blame the Tories and austerity — and “mansplaining”, per the Chancellor — and leave the big decisions for the next government.

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Chris Bayliss is an independent consultant who works on energy infrastructure in the Middle East.

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