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Press Release

The upcoming budget is an opportunity to rethink the current fiscal rule framework

Changing the fiscal rules to allow for an increase in public investment would be a welcome move from the Chancellor.

Responding to rumours that the Chancellor is reconsidering fiscal rules ahead of her first Budget, WBG Director, Dr Mary-Ann Stephenson commented,

“Changing the fiscal rules to allow for an increase in public investment would be a welcome move from the Chancellor. Our infrastructure is in desperate need of investment, from our crumbling schools and hospitals, to potholes in our streets and public transport. It is encouraging to see Rachel Reeves put investment at the heart of her first budget.

“By sticking to the Conservatives’ rule to cut debt as a share of GDP by the fifth year of the forecast the Government would be tying its own hands, limiting much needed government spending. We have learned from austerity that this tends to increase women’s unpaid work and as a result erode their financial security.

“We know that investment in education, care, health and climate change is an investment in the future and will save society costs in the long-term. Borrowing in itself is not a bad thing. In fact, a combination of more progressive taxation and borrowing is a responsible and financially sustainable way to protect and invest in our public services and strengthen our economy.

“However, the Chancellor should go further. The upcoming budget is an opportunity to rethink the current fiscal rule framework that makes a strong distinction between investment and “day- to-day spending”. The latter can be an investment too. Spending on teachers, medical and care workers, even though it is recurrent, is an investment in the sense that it leads to better future outcomes. And since the benefits go beyond those who directly receive these services they can also be seen as infrastructure.

“The state of our economy is not measured by its bank balance alone, but a whole range of assets including the skills, health and abilities of those who keep it running. With record numbers of economic inactivity due to ill-health and NHS waiting lists still high, the Labour Government cannot afford not to invest in people.

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