The financial markets showed a mixed response to Labours first budget this week‚ with govt bonds taking a two-day dive after Rachel Reeves big tax-and-spend announcement (showing both increased borrowing and taxation plans)
The budget watchdog cut its growth outlook which made investors nervous about UKʼs economic path — bond prices dropped on wed and thurs before finding their feet on friday. Despite market worries Keir Starmer says this is just step-one of a bigger plan.
Just as we cannot tax and spend our way to prosperity nor can we simply spend our way to better public services
The Labour govt wants to fix things through several key changes:
- Speed-up housing project approvals
- Make planning system work faster
- Quick-start clean energy projects
- Check how regulators do their job
Former European Central Bank chief Mario Draghi backed the new approach saying its good that UK will check investment quality through independent groups. The International Monetary Fund also gave its thumbs-up to the plan — showing global experts think Labour might be on the right track
The reforms aim to double UKʼs growth rate but these changes werent ready for the budget watchdogs forecast yet. Starmer points out that private-sector cash needs to work alongside govt spending to make everything work-out