Chancellor says Budget will honour all promises made during election campaign

The chancellor wants to spend more on public investment - building stuff like roads and railways, schools and hospitals.

And she’s willing to borrow to do it.

With just days to go until her Budget, Rachel Reeves is in Washington rewriting a debt rule she only set a few months ago, as Robert Peston explains.

Fiscal rules do not resonate with the public but they exist to convey a message, both to voters and investors, that the government can be trusted to pay its debts as they fall due.

They control what a chancellor can borrow and spend but, in practice, are often changed if they start to prove too restrictive.

Under plans drawn up by the Conservatives, public sector net investment in the UK was due to fall from 2.4% of GDP currently to 1.7% by 2028/29.

Reeves has decided she wants to hold investment broadly at the level it is now.

This week the International Monetary Fund (IMF) said higher levels of public investment in the UK is “badly needed” and would help to lift economic growth, but the IMF also characterised our stock of national debt as “high, rising and risky.”

The chancellor thinks investors will be happy to lend her the extra £20 billion a year she will need.

“We will get debt falling as a share of our economy during this parliament,” she told me in Washington. “Financial markets can be confident in the investments that we make that we will get value for money for taxpayers and a return for taxpayers.”

The plan to change the debt rules to free up billions of pounds of infrastructure spending wasn’t mentioned in Labour’s manifesto and there will be more surprises to come in next week, in the Budget.

But the chancellor told ITV News that the government intended to keep all of the promises it made to voters in the election campaign.

“Trust in politics is at an all-time low and a lot of that is because promises are made and then they're ditched. I don't want to be a chancellor like that, we don't want to be a government like that,” Reeves said.One of Labour’s manifesto promises was “no return to austerity"

The chancellor has just agreed the spending settlements with government departments for 2025/26.

Reeves has spoken recently about prioritising resources for the NHS. She won’t say if that means some areas of public services will have to accept cuts next year.

Her budget will contain a host of things that were not in Labour’s manifesto, including some big tax rises.

It’s a huge moment for the economy and the government.

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I asked the chancellor if she worries that voters will be left feeling misled.

“What I hope that people will see in the budget next week is that I’m a responsible chancellor, being honest and transparent about the situation with the public finances and the trajectory for public services,” she replied.

Tonight, there was push-back from Reeves’ predecessor.In a tweet, Jeremy Hunt claimed the “consistent advice I received from Treasury officials was that increased borrowing meant interest rates would be higher for longer - and punish families with mortgages”.

Higher borrowing to fund infrastructure investment does carry risk - it could unsettle investors or cause inflation, both of which would put upward pressure on interest rates.

But the market reaction today was relaxed.

The view of investors thus far is that an extra £20 billion a year in order to keep public investment broadly at the level it is currently, is not “wild” in the Liz Truss sense.

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