As the UK braces for Chancellor Rachel Reeves’ Autumn Budget on October 30th, the Treasury is taking proactive steps to avoid a repeat of the financial market chaos triggered by Liz Truss’ ill-fated mini-budget in 2022. Sources close to the government reveal that Reeves is preparing to announce significant changes to the Treasury’s fiscal rules, paving the way for billions in additional borrowing to fund major infrastructure projects.
Assembling a Taskforce of City Experts
In a bid to reassure jittery markets and demonstrate fiscal responsibility, Reeves is convening the inaugural meeting of the British Infrastructure Taskforce on Friday. This group, comprising leading figures from major City institutions like HSBC, Lloyd’s, and M&G, will advise the government on the viability and value of proposed infrastructure projects.
Increasing investment in infrastructure is a vital part of delivering on our number one mission to grow the economy and create jobs.
– Chancellor Rachel Reeves
New Watchdog to Oversee Public Works
Alongside the taskforce, the government is launching the National Infrastructure and Service Transformation Authority (Nista), a new arm’s-length body that will merge two existing organizations to oversee the strategy and delivery of major public works. This move is designed to ensure value for money for taxpayers and prevent the overspending and delays that have plagued past projects.
Fiscal Rules and Borrowing Headroom
Financial markets expect Reeves to change her definition of the national debt, potentially unlocking up to £57bn of headroom against the Treasury’s self-imposed fiscal rules. Analysts at Goldman Sachs predict that the chancellor could use this space to increase borrowing by £10bn-£20bn per year to finance infrastructure investment.
However, some City investors have cautioned that a poorly managed increase in government borrowing could risk sparking a “buyers’ strike” in the market for UK debt, echoing the turmoil witnessed in the wake of Truss’ 2022 budget.
Contrasting Approaches: Truss vs. Reeves
Speaking to journalists, Chief Secretary to the Treasury Darren Jones drew a sharp contrast between Reeves’ approach and that of her predecessor, Liz Truss. Jones emphasized the importance of “guardrails” and independent checks to ensure taxpayer money is well spent, citing Truss’ disregard for such safeguards as a cautionary tale.
One of the problems that Liz Truss had was that she disregarded independent checks and balances and expertise, borrowed loads of money for unfunded policies, and we know everything that happened next.
– Darren Jones, Chief Secretary to the Treasury
A 10-Year Infrastructure Vision
Looking ahead, the Treasury is set to unveil a comprehensive 10-year infrastructure plan that will encompass key economic priorities like roads, railways, and housing, as well as public sector needs such as new prisons, hospitals, GP surgeries, and schools. This long-term vision aims to provide clarity and confidence to investors and the public alike.
As the Autumn Budget draws near, all eyes will be on Rachel Reeves to see if her carefully laid plans and precautions will be sufficient to steer the UK economy through this critical juncture. With the specter of past missteps looming large, the stakes could not be higher for the chancellor and the country as a whole.
