"The current chancellor's problem is one of her own making. She designed her fiscal rules with so little wriggle room that even small changes in economic forecasts such as revisions to GDP mean that her numbers stop adding up. That, in turn, starts chatter about budgetary holes and the need for tax rises and spending cuts despite no change in the economy."
"She told BBC radio: It would, of course, be possible to stick with the manifesto commitments, but that would require things like deep cuts in capital spending. But this is not true. She's blaming her rules for cuts they don't require. Labour's fiscal rules were changed last October to allow full-throated public investment. There is no trade-off between tax rises and capital spending."
Rachel Reeves' fiscal rules are so tight that small forecast revisions, such as GDP changes, make her numbers stop adding up, prompting talk of budgetary holes, tax rises and spending cuts despite no economic deterioration. She could relax or replace the rules, but instead framed breaking the manifesto pledge not to raise income tax as unavoidable and claimed sticking to commitments would require deep cuts in capital spending. The rules already allow public investment, so there is no necessary trade-off between tax rises and capital spending. Reeves plans to use £3bn of extra revenue to reverse the two-child benefit cap.
Read at www.theguardian.com
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