Rachel Reeves: From the OBR to new fiscal rules, we will bring back stability

The writer is the shadow chancellor

“All we ask for is stability.” The words of a chief executive to me a little less than a year ago in the wake of the disastrous Truss-Kwarteng “mini” Budget.

The damage done during that period was severe. Almost £45bn of borrowing added to the nation’s balance sheet to pay for unfunded tax cuts, our financial institutions undermined, government bonds sent plunging and the pension market pushed to the brink of collapse. It was a disaster, but predictable. 

During my time as an economist at the Bank of England, I learnt a very simple lesson: your sums must always add up. Instability follows when that very basic truth is ignored. 

I want to bring stability back to Britain’s economy because that is the only way we can bring back growth. That commitment starts today with a very simple promise: never again. With a Labour government, never will a prime minister or chancellor be allowed to repeat the mistakes of the “mini” Budget. Delivering that promise means making different choices to those of recent years: institutional, fiscal and ideological.

First, I will never undermine our economic institutions. It was the Labour government that gave the Bank of England independence and I will protect it. It was a Conservative chancellor that established the Office for Budget Responsibility and I will strengthen it.

We will guarantee in law that any government making significant, permanent tax and spending changes will be subject to an independent forecast of its impact from the OBR. In the event of an emergency where budgetary changes must be introduced at speed and a forecast cannot be produced in time, the OBR would be allowed to set a date for when it can publish its forecast.  

And we will provide much more certainty to businesses by committing to holding a single Autumn budget every year by the end of November, giving companies and families four months to plan for the new tax year. 

These changes will be put to parliament as a new charter of Budget responsibility. This will introduce a new fiscal lock on Britain’s economic institutions to strengthen our financial stability and security.

Second, I will never spend what we cannot afford. I will introduce a new set of fiscal rules. These rules will apply to every decision taken by a Labour government. We will not borrow to fund day-to-day spending and we will reduce national debt as a share of the economy. I am clear that these rules are non-negotiable. There will be no exceptions. As with our revised charter of budget responsibility, these rules will be put to parliament to back.

Finally, I will always put Britain’s economic interests first. The “mini” Budget was not just a one off — it was the culmination of 13 years of poor decisions coming out of Whitehall. We are missing out on investment because we do not have an industrial strategy. We are not building enough homes because we have failed to reform our broken planning system. And more than a decade of political instability has fuelled economic instability.

As chancellor, I will make different choices. I will back the British industries that strengthen our energy security, cut household bills and create better paid jobs. I want to use the power of the Treasury to get business round the table so that we can unlock billions of pounds of investment into our towns, cities and regions. I will work with, not against, our financial institutions. And I will take the long-term, difficult decisions to bring growth back to our economy.  

Keir Starmer and I have spent three years changing the Labour party so we can change Britain for the better — and give our country its future back. We will ensure stability returns to our economy. And with that stability, business and working people will be better off.

Letter in response to this article:

Spare a thought for the Labour shadow chan­cel­lor / From Edward Robin­son, Lon­don N1, UK