In a pointed exchange that underscores the Treasury’s unwavering commitment to fiscal rectitude, Chancellor Rachel Reeves has told Greater Manchester Mayor Andy Burnham to ‘stick to the plan’ on economic policy. The rebuke, delivered during a private meeting in Whitehall, signals that Labour’s new government will not be swayed by regional calls for looser purse strings, even from within its own ranks.
Burnham, a persistent advocate for greater fiscal devolution and infrastructure spending in the North, had reportedly pressed Reeves for additional borrowing to fund regional transport projects. But Reeves, a former Bank of England economist and devotee of fiscal discipline, would have none of it. ‘The markets are watching,’ she is said to have cautioned. ‘We cannot afford to lose credibility.’
And she is right. The gilt market, that unforgiving judge of fiscal probity, has been twitchy of late. Yields on 10-year gilts have risen 30 basis points since the election, reflecting investor nervousness about Labour’s spending plans. A single misstep, a wavering from the path of deficit reduction, could trigger a sell-off that would push borrowing costs higher for households and businesses alike.
This is not just about politics. It is about the bottom line. The UK’s debt-to-GDP ratio, at 98%, is among the highest in the G7. Interest payments alone swallow £100 billion a year, more than we spend on defence or policing. Every pound borrowed today is a pound that tomorrow’s taxpayers must repay, with interest. Reeves knows that the only sustainable path to growth is through private investment, not government diktat.
Burnham, to his credit, is focused on the very real deprivation in his region. But the answer is not more borrowing. It is freeing the private sector to invest, cutting red tape, and creating an environment where capital flows to where it is most productive. The Chancellor’s message to Burnham is simple: ‘Help businesses, don’t burden them.’
The reaction from the City has been quietly approving. Sterling edged higher against the dollar on the news, and gilt yields dipped slightly as bond vigilantes took note. ‘Reeves is showing she has the backbone needed to resist internal pressure,’ said a senior fixed-income strategist at a London investment bank. ‘That is what the markets need to see.’
But the battle is far from over. With the Autumn Statement looming, Reeves will face even greater demands from left-leaning MPs and regional mayors to loosen the fiscal reins. She must hold firm. The spectre of Liz Truss’s disastrous mini-Budget still haunts the Treasury. A repeat of that debacle would not just be politically toxic; it would devastate household finances through higher mortgage rates and falling house prices.
For now, fiscal discipline has been upheld. But the real test will come when growth falters and unemployment ticks up. That is when the sirens of easy money sing loudest. Reeves must remain deaf to them. Stick to the plan, Chancellor. The markets, and the country, are counting on it.
