She said: “I think it is really important to be clear about what this investment is for. It’s not to pay for day-to-day spending. It’s not to pay for tax giveaways. It’s to invest in things to get a long term return for our country and for taxpayers.”
However, she vowed to plough on with a plan to borrow to invest, adding that it was important to “free up the money … to invest in things or get a return for taxpayers. Our growth performance has been very poor”.
‘Stability rule’
Ms Reeves announced that the Government would have two self-imposed borrowing goals, including a “stability rule” that requires her to bring day-to-day spending back into balance within five years. A second “investment rule” will say she must get debt falling by the end of the parliament.
Her new target measure – known as public sector net financial liabilities – is already forecast by the Office for Budget Responsibility (OBR) in its twice-yearly assessment of the public finances.
In March, its forecasts showed that targeting this measure would see debt as a share of GDP fall every year to 78.7pc in 2028-29, from 80.6pc in 2027-28, or more than £50bn in cash terms.
This compares with predecessor Jeremy Hunt’s headroom of just £8.9bn under the existing rules, which forecast debt falling only marginally, from 93.2pc of GDP to 92.9pc in 2028-29.
The rule will reflect the benefits of investment as well as the cost. It would also strip out the impact of rising student debt. Switching to this measure would also allow Ms Reeves to borrow for her National Wealth Fund.