New debt rules to unlock £50bn infrastructure spending

Chancellor Rachel Reeves has announced the changes to fiscal rules to free up up to £50 billion for infrastructure spending.

Speaking to the BBC, Reeves said the UK government would make changes to the way debt is measured ahead of Labour’s first Budget next week.

Currently, the amount of money the government can borrow for investment is restrained by the amount of debt it has.

Loosening the five-year target for debt to fall, would allow the government to borrow more to reinvest in major projects.

The Chancellor said, through this the government can begin to “grow our economy and bring jobs and growth to Britain.”

Reeves added: “I have listened to the IMF, who have been clear that we need to free up more money to invest in capital.”

Last week, construction industry bodies called on the government to implement the change to the fiscal rules to “reboot the economy and unblock schemes in all parts of the UK by bringing projects forward to market.” 

Director of operations for the Civil Engineering Contractors Association (CECA) Marie-Claude Hemming said: “The UK economy has suffered for too long from underinvestment in infrastructure, and consequently has displayed anaemic economic growth for years – to the detriment of our businesses and communities.”

However, according to the BBC, the £50 billion this measure will free up to invest in big building projects, is expected to be solely allocated at the Budget.

Reeves reiterated what treasury chief secretary Darren Jones said earlier this month about “putting in guardrails” on investment spending, to ensure the government does so more efficiently.

Through these guardrails, the National Audit Office and the Office for Budget Responsibility can validate “the investments we’re making to ensure we deliver that value-for-money and to give market’s confidence that there are rules around the investments we can make as a country.”

Earlier this year, the Chancellor claimed the Labour government had inherited a nearly £22 billion blackhole from the previous Tory government.

This has lead to a number of plans and projects that were scrapped to reduce government overspend, with Reeves stating: “If we cannot afford it, we cannot do it.”

Reeves told the BBC: “There’s a choice then, about whether we want to continue on this path of decline.

The plans I have inherited from the Conservatives see public sector net investment decline quite rapidly as a share of our economy.

“If we continued on that path we would miss out on other opportunities and other countries would seize them.”

In a speech at Skanska‘s national HQ Jones set out a ten-year national infrastructure strategy to be published next spring, which will outline the government’s approach to core economic infrastructure like transport, energy and housing.

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