Could borrowing to invest get UK out of 'black hole'?

There’s been frantic speculation, at least in those circles interested in such matters, that the government is set to revise the fiscal framework inherited from the Conservatives.

- SEAN O'GRADY

Or, put bluntly, to borrow loads more money and bump up the national debt, already running at about a 60-year high. While no one expects the temperamentally cautious Rachel Reeves to “do a Truss” and launch a shock Budget with vastly bigger borrowing targets, there are legitimate concerns about the impact on interest rates and, thus, mortgages and business confidence. Reeves is under enormous pressure to spend more on public services and invest to improve growth. It’s all very tight, but she does have options...

Why can’t we borrow what we need?

We can, and governments have done so many times, for good and bad reasons. The problem is that it can also push inflation and interest rates higher, thus making economic matters worse. The government now, for example, spends more on paying interest on its debts (about £100bn a year) than on defence (£53bn) or schools (£92bn). Because of the cost of rescuing banks in the global financial crisis of 2008, the ongoing damage inflicted by Brexit, the debts run up by pandemic support measures, and similar measures in the recent energy crisis, the national debt has ballooned to about 100 per cent of national income. Now interest rates are more normal, it’s becoming a burden.

What are the fiscal rules?