Davos: Reeves defends fiscal rules and says Heathrow expansion is ‘pro-growth’
Rachel Reeves has insisted the UK would continue to meet her “fiscal rules”, describing them as the “bedrock” of the stability she aims to restore to the economy and public finances.
The Chancellor spoke at a Bloomberg event at the World Economic Forum in Davos, as the Office for National Statistics (ONS) said public sector net borrowing stood at £17.8bn last month – the third highest for any December on record.
But Reeves defended her approach to the public finances with her two fiscal rules of paying for day-to-day spending through tax receipts and bringing debt down as a share of gross domestic product.
She acknowledged that the £9.9bn of headroom to meet those targets in the final year of the economic forecast was “tight” but added “those fiscal rules are important to us because they are the bedrock, the foundation of that stability that I’ve spoken about”.
“So, we will continue to make decisions to ensure that we meet those fiscal rules.”
The government has also been hit by rising borrowing costs this month, but Reeves played down the impact that would have on meeting her rules.
“There’s been, undoubtedly, global movements in financial markets this year, mainly driven by the US but, of course, the UK gets caught in those headwinds,” she said.
“The Office for Budget Responsibility (OBR) are just starting their forecast process and they don’t take into account just one week’s moves in financial markets, they look at a period of time.
“But I don’t think we should get ahead of ourselves, there’s a couple of months before that OBR forecast is published, I will respond to that in the proper way and make sure that we continue to meet those fiscal rules.”
Chancellor won’t be drawn on Heathrow
The Chancellor also said she would face down opposition to pro-growth policies amid reports she will back a proposed expansion of Heathrow despite Labour allies’ reservations.
Reeves said she wanted to ensure any pro-growth measure “trumps other things” but would not comment on speculation about a Heathrow decision, which could trigger a row with critics including London mayor Sir Sadiq Khan and energy secretary Ed Miliband.
“This was the problem with the last government, that there was always somebody that said ‘Oh yes, of course we want to grow the economy, but we don’t like that investment, we don’t like that wind farm, we don’t like those pylons, we don’t like that airport, we don’t want that housing near us’.
“But the answer can’t always be ‘no’ and that’s been the problem in Britain for a long time, that when there was a choice between something that would grow the economy and anything else, anything else always won.
“Now, of course, there are other things that matter, but when we say that growth is the number one mission of this government, we mean it, and that means it trumps other things.
“And so we’re making pro-growth decisions in the national interest.”