Tax & Spend
UK Watchdog Sees Case for Reeves to Ramp Up Public Investment
- OBR says benefits from investment mostly come in the long run
- Study fuels fiscal debate as Labour warns of ‘painful’ budget
Rachel Reeves
Photographer: Jeenah Moon/BloombergThis article is for subscribers only.
The UK’s fiscal watchdog laid out the case for new Chancellor Rachel Reeves to embark on a public investment splurge, amid concern that she risks hurting growth with an overly cautious budget.
The Office for Budget Responsibility said that most benefits from higher investment arrive long after the five-year period that’s captured by its forecasts and by the government’s self-imposed fiscal rules. Within that timeframe, an investment boost equal to 1% of gross domestic product could raise the economy’s potential output by just under 0.5%, the watchdog’s economists wrote in a discussion paper. But gains would snowball over the longer term, adding some 2.5% to GDP after 50 years, they said.