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UK FISCAL: Guardian sources report PSNFL to be the new fiscal rule (2/2)

UK FISCAL
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  • There are a couple of things to put in context here, however. First, this was partially (but probably not fully) already in expectations. But, it is also important to note that the Labour manifesto also committed to "balancing day to day spending".
  • Will the Budget increase infrastructure spending and mean more gilt issuance? Yes, in our view.
  • Will that be super front loaded and therefore have huge implications on how much the BOE can cut in 2025? Probably less than people expect - infrastructure spending takes time and planning. Some can be done quickly (e.g. buying new computers) but building transport / power infrastructure takes a long time to get shovels in the ground.
  • In our view, it's likely that the extra spending is likely to be spread across the next few years - with a lot of the spending commitments dependent upon the multiyear spending review that will get underway in the Spring. And therefore on balance, we still think that there is scope that this year's Budget sees less concrete spending commitments than some expect.
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  • There are a couple of things to put in context here, however. First, this was partially (but probably not fully) already in expectations. But, it is also important to note that the Labour manifesto also committed to "balancing day to day spending".
  • Will the Budget increase infrastructure spending and mean more gilt issuance? Yes, in our view.
  • Will that be super front loaded and therefore have huge implications on how much the BOE can cut in 2025? Probably less than people expect - infrastructure spending takes time and planning. Some can be done quickly (e.g. buying new computers) but building transport / power infrastructure takes a long time to get shovels in the ground.
  • In our view, it's likely that the extra spending is likely to be spread across the next few years - with a lot of the spending commitments dependent upon the multiyear spending review that will get underway in the Spring. And therefore on balance, we still think that there is scope that this year's Budget sees less concrete spending commitments than some expect.