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politics6h ago
Fears at Burnham push to ditch fiscal rules for defence spending boost
- Burnham proposed excluding defence spending from fiscal rules to enable more borrowing for the military.
- Analysts warned that such a move could be seen as a formal loosening of fiscal rules and affect gilt yields.
- Burnham signaled the possibility amid broader hints about a future leadership bid for prime minister.
- Defence spending is substantial, estimated at around £40 billion yearly plus £20 billion in capital investment.
- Labour MPs and economists warned the idea could prompt market jitters and were skeptical of the plan.
- Rachel Reeves emphasized that defence funding has already seen uplifts in her budgets.
- The debate comes as UK debt servicing costs are influenced by global tensions, including the Iran conflict.
- The discussion reflects ongoing tensions within Labour about how to fund defence while maintaining fiscal discipline.
- Economic experts argued that changing the rules could jeopardize fiscal credibility and borrowing costs.
- Defence bonds were discussed as potential funding mechanisms, though opposition warned of broader fiscal implications.
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