Jeremy Hunt, the current shadow chancellor and former Financial Secretary to the Treasury, has criticized Chancellor Rachel Reeves for changing the definition of debt used in fiscal rules, claiming it will “punish families with mortgages.” He argues that increasing borrowing, as advised by Treasury officials, will lead to higher interest rates, impacting mortgage holders. Hunt took to social media to express his concerns, questioning why the major change was not announced to parliament.
Reeves defended her decision, stating that the revised fiscal rules will allow for more investment while ensuring taxpayer money is spent wisely. She emphasized the need for increased investment for future economic growth and job creation, citing recommendations from experts like the IMF and former officials.
The Liberal Democrats called for any additional borrowing resulting from the rule change to be allocated to fixing infrastructure in the NHS, while the Conservative party warned of potential consequences like higher borrowing costs and prolonged elevated interest rates.
Reeves confirmed the debt definition change but did not specify the new measure, hinting at the Public Sector Net Financial Liabilities (PSNFL). She outlined her fiscal rules to balance day-to-day spending with revenues and reduce debt relative to GDP, enabling increased investment in the economy.
The decision to revise debt definitions has impacted financial markets, with UK government borrowing costs rising. This move is expected to unlock billions for infrastructure investment, although it has raised concerns about potential economic repercussions. The debate continues between politicians and experts on the impacts and implications of these changes in fiscal policy.
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