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UK FISCAL: New fiscal rules and near-term schedule (3/3)

UK FISCAL
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  • In terms of measurement of debt, there are again a few options for Reeves. Excluding the BOE from the debt measures would be significant as the APF alone is forecast to make cash losses of around GBP20bln per year (although this assumes a faster pace of active gilt sales than recently announced by the BOE and probably assumes more capital losses with interest rates being higher for longer in the March forecast). We have seen some reports that this could free up to around GBP50bln of extra infrastructure spending - a number that seemed to spook gilt markets on Monday this week.
  • It appears as though the probability of more controversial measures is receding (based on media reports). The most controversial would be to look at net debt when including government assets (government buildings such as schools, hospitals etc) - but these things are hard to value. An interim measure would be to take things like the student loan book, BOE, long-term investment off balance sheet.
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  • In terms of measurement of debt, there are again a few options for Reeves. Excluding the BOE from the debt measures would be significant as the APF alone is forecast to make cash losses of around GBP20bln per year (although this assumes a faster pace of active gilt sales than recently announced by the BOE and probably assumes more capital losses with interest rates being higher for longer in the March forecast). We have seen some reports that this could free up to around GBP50bln of extra infrastructure spending - a number that seemed to spook gilt markets on Monday this week.
  • It appears as though the probability of more controversial measures is receding (based on media reports). The most controversial would be to look at net debt when including government assets (government buildings such as schools, hospitals etc) - but these things are hard to value. An interim measure would be to take things like the student loan book, BOE, long-term investment off balance sheet.