Rachel Reeves’ changes to fiscal definitions on borrowing could crumble UK economy

Nick Winters, Partner said:

The seemingly leaked proposals to tinker with fiscal definitions on borrowing could be Labour’s plan to unlock over £50b without instantly hurting the pockets of voters.

However, increased borrowing and increased borrowing costs would have to be paid back by all taxpayers over time and with interest. At some point, she would need to raise taxes even further or risk widening the fiscal £22b ‘black hole’, which given the tax rises already proposed in the budget, is a scary possibility.

Nick said:

Labour made many broad promises at the last election which Rachel Reeves is hand-tied by. Tinkering with the definition of borrowing could be a big, if temporary, win for her without breaking those election promises.

However, this proposal gives the impression that Labour is tweaking a large spreadsheet to attempt to meet all of their promises. But unlike a spreadsheet, there are only so many tweaks our economy can take before it crumbles.

Corporates, individuals and their advisers want honesty, transparency, fair taxes and long-term economic growth and confidence. They do not want quick fixes; they want carefully planned and expert led policies that think further ahead than the next election and beyond party politics.

It is now becoming common practice for Chancellor’s to leak much of the intended content of their budgets in the weeks before hand. But these suggestions have been spooking the markets with fear that the UK’s borrowing costs have now increased. Who needs Halloween when we have the Budget the day before?

Would you like to know more?

If you would like to discuss any of the above, please speak to your usual Blick Rothenberg contact or Nick Winters using the form below.