How Rachel Reeves might unlock £57 billion at the budget with a ‘simple’ fiscal rule change
Your support helps us to tell the storyFind out moreCloseOur mission is to deliver unbiased, fact-based reporting that holds power to account and exposes the truth.Whether $5 or $50, every contribution counts.Support us to deliver journalism without an agenda.Louise ThomasEditorRachel Reeves is thought to be considering making a major change to Labour’s fiscal rules at the budget on 30 October by borrowing billions for infrastructure investment.The move has sparked fears of the potential of rising debt, but the chancellor is reported to have told the cabinet she wants the Treasury to change how it accounts for capital spending to also reflect the benefits of investment.The change to Labour’s fiscal rule – laid out in the party’s manifesto – could unlock up to £57 billion for infrastructure spending, some experts predict.Ahead of the general election, Labour pledged to follow two rules. The first was that in the current budget, costs are met by revenues such as tax. This has proven much more of a challenge for Ms Reeves than she anticipated after she unveiled Treasury analysis in late July which showed a £22 billion shortfall in public spending.The chancellor has acknowledged this herself, saying at a Labour Party Conference fringe event that the measure would be “incredibly hard” to meet and require “tough decisions” to be made.The second rule is that debt must be falling as a share of the economy by the fifth year of the economic forecast. This measure rules out excessive borrowing to fill Labour’s black hole, as debt would be driven up as a result.However, during her speech at the conference, Ms Reeves said: “It is time that the Treasury moved on from just counting the costs of investments to recognising the benefits too.” The comment caused experts to speculate that she may be looking to alter Labour’s fiscal rules at the budget to deal with what Labour calls its unexpected “inheritance”.Rachel Reeves and Keir Starmer at Labour’s 2024 conference More
