Chancellor’s growth mission risks being held back by lack of public investment

Chancellor Rachel Reeves’ mission to deliver economic growth risks being undermined by a lack of public investment and the commitment to the previous government’s fiscal rules, the New Economics Foundation (NEF) has warned.

Following the chancellor’s first major speech today [Monday, 8 July], experts at the leading progressive think tank have said the government had several tools to get the UK economy working for everyone, including responsible borrowing and changing the way the Treasury subsidises the Bank of England’s interest payments to the banking sector.

Hannah Peaker, director of policy at NEF said:

“Our new chancellor’s ambition to get the UK out of its economic rut is promising, but will be scuppered by her reluctance to talk about public investment.

“Private investment has to go hand-in-hand with significant public investment. This is clearest in Reeves’ housebuilding targets: bulldozing planning processes without public investment in new social homes will simply create more homes which are too expensive for most of us, while creating huge profits for private companies.

“If we want to see decent growth again, our new government can’t be afraid to spend. A new government has plenty of ways to raise money, from borrowing responsibly to taxing the wealthiest to scrapping stealth subsidies to banks.

“Remaining wedded to outdated and arbitrary fiscal rules will hold our economy back. Our fiscal rules aren’t an accurate measure of how much a government can responsibly borrow — and the chancellor could choose to replace them with the wave of a pen.”

ENDS

Contact

James Rush – james.rush@neweconomics.org

Notes

The New Economics Foundation has set out how tiering reserves could save up to £55bn over the next five years here.