New Chancellor John Healey is reportedly exploring plans to access an additional £9 billion per year for government spending by utilizing changes to Labour's fiscal rules. The Treasury is said to be examining ways to count certain expenditures as assets, which could then offset borrowing costs, as the government seeks to stimulate economic growth.
These potential changes aim to facilitate Prime Minister Andy Burnham's commitment to fostering growth across the country. The increased funds could be directed towards infrastructure projects, housing initiatives, and support for businesses. Additionally, the money may be channeled to regional mayors as part of Mr. Burnham's devolution agenda.
The reported strategy involves exploiting modifications made by former Chancellor Rachel Reeves to the fiscal rules, allowing some spending to be classified as assets. Mr. Healey, who is set to deliver his first budget on October 28, has indicated that there is "scope for more and more rapid investment." He replaced Ms. Reeves in the Treasury last month.
Analysts suggest that any additional borrowing could be funneled through entities such as the British Business Bank, the National Wealth Fund, and the National Housing Bank. The Resolution Foundation think tank has estimated that by increasing the scale of the National Wealth Fund, the government could achieve an additional £9 billion in annual investment by 2031.
Elliott Christensen, a senior economist at the Resolution Foundation, argued that leveraging the fiscal rules could help address a long-term investment deficit exacerbated by the UK's withdrawal from the European Investment Bank after Brexit. He stated that Ms. Reeves' changes provide greater scope for productive investments that could pay for themselves over time.
However, the Conservative party has voiced strong opposition to the reported plans. Shadow Chancellor Mel Stride warned that the proposals would lead to increased national debt and higher interest payments. "This is just more borrowing, which means more debt, and more interest payments," Stride said, adding, "Labour can't be trusted with the economy or the public finances, because they don't understand either."
The UK's public sector net debt currently stands at nearly £3 trillion, with debt interest costs reaching £97.6 billion in the 2025/26 fiscal year, the second-highest annual level on record. In the same period, the government borrowed £132 billion.
A Treasury spokesperson stated that the Chancellor is focused on his priorities of boosting business, aiding with the cost of living, and supporting people nationwide. The spokesperson added that decisions would be announced at fiscal events, rather than commenting on speculation.
Prime Minister Burnham, upon taking office last month, indicated he would seek "any flexibility" within the fiscal rules. He has previously expressed that Britain should not be overly reliant on bond markets. Jim O'Neill, a former Treasury minister who has advised Mr. Burnham, has also called for a bolder approach to borrowing for investment, suggesting it could be pursued without alarming financial markets.