@neweconomics.bsky.social

5/5 It's a move towards better coordination. Lower inflation means BoE can cut rates, lowering the cost of green investment and mortgages. Lower interest rates means lower government borrowing costs - opening space for the investment we desperately need: investinbritain.org.uk/resource/clo...

4/5 Government has also recognised the need for stronger regulation on specific dysfunctional markets - like dentistry - to bring down costs. Another nod to the relative efficacy of government policy over general interest rate policy for targeting specific sector cost issues.

3/5 ...although cutting energy bills must not come at the cost of better insulating and retrofitting out homes - more on this (ECO etc) in another thread.

2/5 High interest rates can't bring down energy price spikes caused by geopolitical conflict and the UK's overreliance on gas. Yet energy costs feed through to almost all other prices. Fiscal policy is better suited to tackling this - government now rightly recognises this.

As @theoharris.bsky.social set out last year - the NWF could raise £100bn by issuing its own bonds:

--> neweconomics.org/2024/10/the-...

The NWF has the potential to deliver huge benefits for the UK economy, it's time for a step change in ambition!

Not only would this enhance the NWF's independence from the Treasury when funding projects, but will grant it more space to grow in scale & ambition and have serious impact - it is currently miniscule relative to international comparators:

www.bloomberg.com/news/article...

Unless the fiscal framework changes, the UK is stuck in a doom-loop: low growth, high yields, eroding credibility. The Autumn Budget must deliver bold policy *and* reform the institutions that shape the prevailing narrative to foster more confidence in the UK economy.

This would let the Chancellor openly challenge OBR assumptions, providing it more weight in shaping the prevailing narrative.

By removing the straitjacket on the chancellor without undermining accountability, the UK could gain space to invest and rebuild confidence.

But what if the 'prevailing narrative', and therefore market pricing was not so dominated by narrow & contested OBR assumptions? We propose an Office for Forecast Transparency, with a diverse panel of 9 economists ruling on fiscal sustainability.

neweconomics.org/2025/08/a-de...

Wadhwani says bold action is needed at the Autumn Budget to raise revenues + boost growth. But the bond market response still hinges on how the OBR judges the numbers.

www.theguardian.com/business/202...

This contested decision will exacerbate the vicious cycle: Govt invests to boost growth → OBR discounts the impact → “fiscal black hole” narrative grows → markets lose confidence → yields rise → borrowing costs soar.

As explained by Chris Giles in the FT: "Sir Keir Starmer and Rachel Reeves’ fortunes depend on the mood of two OBR officials…on the day they set their productivity growth forecast".

www.ft.com/content/bd3d...

These forecasts are uncertain and judgement based: the OBR chose not to score the growth effects of the last budget & is expected to cut productivity forecasts this autumn (a disputed decision), fuelling a gloomy, fiscal hole narrative.

www.ippr.org/articles/nav...

As former MPC member Sushil Wadhwani puts it: "Market pricing is often dominated by the prevailing narrative" - which in the UK economy is rooted firmly in OBR forecasts.

www.theguardian.com/business/202...

Compared to other countries with high debt levels, the UK's fiscal situation isn't that bad: net debt is <100% & the deficit is on track to come down. So that can't explain the market pricing driving higher long-dated gilt yields in the UK specifically.

www.ft.com/content/bd3d...