The Chancellor should scrap her fiscal rules if she is serious about growth

Public sector spending has continued to significantly exceed income in April, leading to a spending deficit covered by borrowing of £20.2bn.

This is an increase on the £16.4bn recorded in April and is a concerning figure for the Chancellor as it continues to put strain on her slim fiscal headroom.

Yields on UK bonds are relatively high and have risen even further following the largest jump in inflation since the height of the inflation crisis in October 2022, increasing the interest the Government must pay on its borrowing.

The OBR has warned that the interest on debt could exceed £100bn a year until the end of this Parliament. This would be a considerable burden on public finances.

Despite hopes for a boost to the economy following this week’s UK-EU deal, growth forecasts remain low. Low growth results in lower tax revenues and lower Government income, making it almost impossible for the Chancellor to balance public spending and revenue without growth-inhibiting tax raids.

Of the Government’s two economic goals — cutting the deficit and creating a growing economy — they must prioritise growth.

To do this, the Chancellor should scrap her fiscal rules to enable public and corporate investment and focus on recalibrating the economy onto a positive path to growth.