Closing post
Time to wrap up…
Chancellor Rachel Reeves has confirmed she will change the measure of public debt that the government targets in next week’s budget in order to allow more borrowing for investment.
She made the comments after the Guardian reported that she plans to change Britain’s debt rules to unlock up to £50bn of additional headroom for investment in infrastructure. That news nudged up UK borrowing costs today:
Reeves has also said that “taxes will need to rise” to meet her first fiscal rule, to balance day-to-day spending with revenues.
Writing in the Financial Times today, Reeves also said her second fiscal rule – to have debt falling in five year’s time – would “ensure we don’t see the falls in public sector investment that were planned under the last government.”
But she hasn’t, yet, confirmed that she will move to use the public sector debt net of financial liabilities (PSNFL) measure.
Elsewhere in Washington DC, the head of the IMF warned that the global economy is facing an “anxious time”.
Kristalina Georgieva said:
For most of the world, a soft landing is in sight.
But people are not feeling good about their economic prospects.
In the UK, growth in the private sector has slowed to an 11-month low…
…at a time when consumer confidence is also weakening…
…while in Germany, the economic downturn continues.
Reeves confirms changes to government debt rules
Newsflash: Rachel Reeves will pledge to reverse huge cuts in public investment in her budget next week after she said that rules limiting her spending power will be overhauled.
Confirming revelations in the Guardian on Wednesday, Reeves said she was not prepared to see public investment fall even further behind the levels seen in other major economies.
She told reporters in Washington DC today:
I can confirm today that will be changing the way that we measure debt in the budget statement next week, but I’ll set out the details of that to Parliament.
Concerns in financial markets that Labour will allow a spending bonanza, mimicking Liz Truss’s infamous mini budget in 2022, were scotched by the chancellor, who said she would maintain strict limits on Whitehall budgets and would not spend all the extra investment funds in her first budget.
Speaking at the IMF’s annual meeting in Washington, she said:
“It’s really important for the sustainability of public finances, that we give confidence to markets that we’re not borrowing to pay for the day-to-day functioning of government.
“And we’ll work with the National Audit Office and the Office for budget responsibility to make sure that all those investments are properly validated, she added.
