Rachel Reeves: It’s not progressive to pay off US hedge funds for debt
Chancellor Rachel Reeves has said there is “nothing progressive” about paying off US hedge funds which hold government bonds, hours after the Office for National Statistics (ONS) revealed debt interest payments in June were double levels seen at the same time last year.
In a hearing at the Economic Affairs Committee, Rachel Reeves said she would not tweak fiscal rules that limit borrowing amid criticism from Labour backbenchers and some economists.
Reeves emphasised the government’s fiscal policy depended on the “good will of strangers” and had to provide “confidence to bond holders to carry on buying government bonds”.
“We have restated our commitments to the fiscal rules,” Reeves said.
“Those are non-negotiable because it is the fiscal rules that provide that stability that underpins a successful, thriving and prosperous economy.
“One in £10 of government spending is spent servicing our debt. I am a Labour politician. I don’t think there’s anything progressive about spending £100bn a year, often to US hedge funds when I would rather spend that money on our health service or on defence.”
The ONS revealed earlier on Monday that the government spent £16.4bn on debt interest payments while borrowing overshot predictions by around £3bn.
Forecasts by the Office for Budget Responsibility (OBR) say debt interest payments will reach £122bn by 2030 while City analysts believe the costs could be higher due to jumpy gilt yields and shaky bond markets in Japan and the US.
Rachel Reeves snaps back
Rachel Reeves also appeared to hit back at critics who disagreed with her decisions without providing alternatives as she told Lords and Baronesses that the “onus” was on her opponents to explain what they would do differently.
“You can’t support the increase in public spending unless you support the money to pay for it.”
“If you don’t support the increase, then that’s fine, but you have to justify why you would not be putting in the additional £29bn into our health service.”
Liberal Democrat peer Lord Razzall told the Chancellor she should have increased taxes on banks, technology companies and gambling firms instead of businesses through higher national insurance contributions (NICs), which he claimed would have yielded the same results.
“[It’s] maths like that that got us into the problems we are in today,” Reeves retorted.