A group of leading economists, including Lord Gus O’Donnell and Professor Mariana Mazzucato, have penned a letter urging Chancellor Rachel Reeves to change the UK’s fiscal rules. They warn that under-investment has led to economic stagnation and decline, and that sticking to previous spending plans will hinder the government’s “decade of national renewal”. The group argues that the current debt rules create a bias against investment and call for changes to allow for increased public investment. Reeves has previously stated that borrowing should be used for capital projects rather than day-to-day spending. The Treasury has responded by stating that Reeves is committed to the current fiscal rules and will provide more details in the upcoming budget. Reeves is expected to raise taxes and cut spending in the budget, but the economists warn against further cuts to public investment. The group calls for a strategy to increase public investment and implement a fiscal framework that focuses on long-term sustainability. The economists’ letter comes at a time when UK house prices are rising sharply, driven by falling mortgage rates and increased market activity. The Bank of England is expected to set interest rates on Thursday, with a 30% chance of a rate cut. The economists hope their plea for increased investment will be considered in the budget as a crucial step towards improving the UK’s economic prospects.
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Rachel Reeves cautioned that reducing investment could harm the ‘pillars of the UK economy’ – live updates from the business world | Business
