Rachel Reeves has vowed to “invest, invest, invest” as she prepares to ramp up borrowing to fund a multibillion-pound capital programme at this month’s Budget.

But the UK chancellor also sought to assure jittery markets, telling the Financial Times she would install “guardrails” and was not in “a race to get money out of the door”.

“It’s about making prudent, sensible investments in the long term and we need guardrails around that,” she said.

In an interview, Reeves also indicated higher taxes would help fill a £22bn hole she has identified in the public finances and take pressure off government departments, some of which faced real-terms cuts. “There won’t be a return to austerity,” she said. 

Reeves has signalled she wants to ease borrowing rules in her October 30 Budget, the first by a Labour government since 2010, to fund extra capital investment in areas such as green energy projects and transport schemes.

But Reeves said the Office for Budget Responsibility, the fiscal watchdog, and the National Audit Office, the spending watchdog, would have key roles in scrutinising her plans and assessing their long-term value.

“We will make sure that investment genuinely boosts growth and we will look at the role of institutions to demonstrate that, including, for instance, the NAO as well as the OBR,” she said.

Yields on the 10-year gilt were at 4.12 per cent on Friday, the highest since late July, partly reflecting concerns among investors that Reeves will sharply increase borrowing in the Budget. 

Analysts have also argued that the chancellor should introduce robust reviews of investment to police valuations and net returns, reducing the risk that public money gets frittered away on poorly judged projects.

Reeves’s advisers have been discussing ways of ensuring the OBR fully reflects the growth-enhancing benefits of public investment as it pulls together its fiscal forecasts. “Invest, invest, invest is the theme of this Budget,” she said.

Part of the problem, however, is that the time needed to put projects in place mean the bulk of the growth benefits from new infrastructure projects can take longer than five years to be felt — even though this is the time horizon under which the chancellor is assessed under her fiscal rules.

“I hope that at the Budget the OBR will look at not just the short-term impact of boosting capital investment but also the long-term impact and the catalytic impact of public sector investment crowding in private investment,” she said. 

Reeves was speaking on a train en route from London to Merseyside, where she and Prime Minister Sir Keir Starmer announced more than £21bn of support over 25 years to develop the carbon capture and storage industry.

The chancellor confirmed she was looking to revise her fiscal debt rule to “take account of the benefits of investment, not just the costs” but declined to say how much more borrowing this would allow for capital expenditure.

Reeves intends to stick to her rule that states that net debt as a share of GDP should be falling between the fourth and fifth year of the forecast, but crucially she is looking at changes to the way that debt is defined.

Switching to balance sheet measures such as public sector net worth or public sector net financial liabilities would boost budget headroom by upwards of £50bn by the end of the parliament, allowing her to borrow tens of billions more for investment.

Investors are seeking reassurances that only part of this extra borrowing capacity would actually be used if she went down this route.

Reeves inherited plans from the previous Conservative government that would have seen a succession of cuts in public sector net investment.

Reversing those cuts and keeping net investment at this year’s level as a share of GDP would imply £24bn of extra annual spending by 2028-29, the Institute for Fiscal Studies said. Treasury officials admitted it would be “difficult” to achieve that figure.

Reeves will also use her Budget to raise taxes to help boost day-to-day Whitehall budgets, ripping up spending plans by ex-Conservative chancellor Jeremy Hunt that implied real-terms cuts for “unprotected” departments such as justice and local government.

“The idea of this Budget is to wipe the slate clean and make an honest assessment of spending pressures and tax as well,” she said. “The previous government was relying on a fiction. The Budget is an opportunity to bring honesty to the public finances.”

Reeves hinted that the £22bn fiscal “black hole” she claims to have unearthed this year was not a one-off. Many of this year’s costs — such as higher public sector pay — will recur in later years, along with other unexpected costs, and would need permanent funding.

“The truth is, if you add £22bn every year, you’re underwater on the previous government’s fiscal rules,” she said. She has refused so far to set a timetable for balancing the current budget but said that “five years is obviously the maximum”.

Reeves said the need to find tax revenues to cover current costs was “the real binding constraint at this Budget”.

She suggested that the wealthy should accept that they would have to pay their share, arguing that “bringing back stability” to the public finances would create the foundations for growth and future wealth creation.

Higher taxes on private equity bosses, private school fees and non-doms — albeit scaled back — are expected in the Budget, with speculation of higher rates of capital gains tax. “I’m not being ideological about this but we need to raise money,” Reeves said.

Meanwhile, Reeves admitted that the public was unsettled by the recent controversy over free clothes and other gifts donated to senior Labour figures. The issue has come at a time of tough financial pressure and after her early decision to cut £1.5bn of winter fuel payments to about 10mn pensioners.

In 2023 and this year Reeves accepted a total of £7,500 from an old friend, which was used to buy clothes before the election. She also accepted tickets for an Adele concert.

“I do understand why people think it is a little bit odd,” she said. “I’ve not taken any of these donations since I became chancellor. It’s important when you’re in government that you’re held to higher standards because you’re actually making decisions that affect the public.”

A 200m (650ft) stretch of train track was left suspended in the air following flash floods and landslides in central Bosnia-Herzegovina.

At least 19 people have died, and several others have been reported missing. A state of emergency has been declared.

Footage has also shown homes and vehicles being almost submerged by flood waters

Your obituary of Peter Jay “The editor who became Britain’s man in Washington” (September 28) highlights his continued importance, not least to students of economics who are still reminded of the speech he drafted for his father-in-law prime minister, James Callaghan, to deliver at the 1976 Labour party conference. It included the lines “we used to think that you could spend your way out of a recession . . . I tell you in all candour that that option no longer exists”.

Jonathan Derbyshire’s obituary correctly points out this speech “called time” on the traditional economic policies and instruments of the postwar consensus. But the tribute could have made more of the period when Jay was BBC economics editor. There was no mention, for example, of his documentary and book The Road to Riches. It’s worth rereading. In it Jay comments that after many years of wars (from the nine years’ war to the American war of independence) there had been a massive increase in the UK national debt despite a huge increase in taxation. Sound familiar? The solution, he wrote, was “to make it easier and more attractive for those with money to lend to the government and less burdensome for the government to borrow”.

In modern terms, reform of the government bond (gilts) market could provide a parallel. Three aspects are worthy of attention. The market could be made more easily accessible to retail investors via online share-dealing platforms.

Inflation-linked annuities — surely the most appropriate investment for securing retirement income — could be provided directly by the Debt Management Office. The private sector seems particularly poor at providing such instruments.

And third, government debt to directly finance much-needed capital infrastructure projects could be launched. It is a time for creativity in government debt management rather than just filling black holes.

Paul Temperton
Chalfont St Giles, Buckinghamshire, UK

A retired police officer is under a criminal investigation over the wrongful conviction of Andy Malkinson for a rape he did not commit, the police watchdog has said.

The former Greater Manchester Police officer is being investigated for allegedly perverting the course of justice and misconduct in public office in relation to Mr Malkinson’s trial 20 years ago, the Independent Office for Police Conduct (IOPC) said.

The former officer and three other officers, who are also retired, are also being investigated for alleged gross misconduct.

Mr Malkinson was exonerated last year after suffering the longest miscarriage of justice of the 21st century.

Mr Malkinson said he felt vindicated by the IOPC investigation but he would “not be satisfied until officers face real consequences”.

“If Greater Manchester Police get away with what they did to me, they’ll keep doing it. It’s as simple as that,” he said.

Judges at the Court of Appeal were told of long-undisclosed DNA evidence that showed another man must have been the rapist in an attack on a woman in 2003.

No forensic evidence ever linked Mr Malkinson to the victim and he did not bear a facial injury that she had inflicted upon her attacker as she fought to defend herself.

He did not look like her initial description of the rapist and there was no evidence to link him to the secluded scene of the crime, near Bolton.

Mr Malkinson spent 17 years in jail protesting his innocence and a major judge-led inquiry is continuing into how the wrong man was convicted.

The decision to investigate the four officers comes after the IOPC took over a review into how GMP had itself handled complaints from Mr Malkinson.

An IOPC statement said that it was looking at how GMP came to identify Mr Malkinson as the key suspect and whether witnesses had been offered incentives to pick him out.

The watchdog said it was also investigating whether there had been a failure to disclose information that may have helped Mr Malkinson at his trial and it was also looking at whether officers followed the “appropriate processes” in how Mr Malkinson had been identified.

The watchdog said it was also investigating how GMP handled and disposed of evidence.

During Mr Malkinson’s successful appeal last year, it emerged that the original DNA samples recovered from the victim and her clothing had been destroyed.

Catherine Bates, IOPC Regional Director, said: “Mr Malkinson is a victim of one of the worst miscarriages of justice in British history.

“Following a detailed review of evidence spanning a period of more than 20 years, we have now informed four retired GMP officers that they are under investigation for potential gross misconduct.

“One of the officers has also been notified that they are under criminal investigation for potential misconduct in public office and perverting the course of justice in relation to their actions during the police investigation and subsequent trial.

“We will continue to keep Mr Malkinson and GMP updated on our progress.”

Emily Bolton, Mr Malkinson’s lawyer at the legal charity APPEAL, welcomed the IOPC’s decision to continue its investigation.

“Andy’s wrongful imprisonment was not an unavoidable accident,” she said.

“Police accountability isn’t optional – it’s essential. Andy, his family, and the rape victim in this case all deserve justice.”

Getty Images

‘Show appreciation for good service’

‘My regulars took me out and paid for my drinks’

‘It’s nice to have a guide’

Getty Images

‘It feels like blackmail’

Nige Eaton says a service charge ‘does feel like some sort of blackmail’

‘A good review helps more than loose change’