Rachel Reeves Eyes Fiscal Rule Shuffle To Bring £50bn Investment Boost in Next Budget

Rachel Reeves is looking to unlock over £50 billion for UK investments in next month’s budget by revising how the government measures debt within its fiscal framework.

According to senior government sources cited by The Times, Reeves has requested that officials explore options to allow the government to offset certain assets against national debt. This would enable a more substantial investment in the economy. Potential assets could include the £236 billion in student loans and the government’s stake in banks like NatWest.

At a recent fringe meeting during Labour’s conference, Reeves emphasised the importance of recognising the benefits of public investment alongside its costs. “Other countries look at assets as well as liabilities, and we’re looking at all of those things,” she stated.

If successful, this approach could facilitate significant investments, such as Labour’s proposed £7 billion national wealth fund and the £8 billion earmarked for the new Great British Energy initiative. However, it’s important to note that this strategy wouldn’t extend to increasing daily spending, such as reinstating winter fuel payments, which Reeves insists must be covered by annual tax revenues, not borrowed funds.

Economists suggest that this shift could indeed free up over £50 billion for economic investment. Lindsay James, an investment strategist at Quilter Investors, pointed out that the fiscal rules have been altered six times in the past nine years, making this proposed change quite feasible. Nevertheless, she cautioned that with UK debt now at 100% of GDP, bond investors may closely scrutinise how the government calculates its financial capabilities.

Currently, the government’s fiscal rules stipulate that national debt should decrease as a percentage of GDP over the next five years.