Starmer signals that the UK budget will include an increase in capital expenditure.

Sir Keir has cleared the path for a large increase in capital expenditure at the Budget next month, after his government received the backing of Paris-based OECD reforms that boost growth-enhancing investment. In New York, Prime Minister Cameron said that he wanted the government to be a “catalyst”, encouraging private investment. He also indicated he thought the UK’s fiscal regulations should encourage capital expenditure. He said, “I have always believed that we should borrow money to invest.”

The Chancellor Rachel Reeves is set to announce revised fiscal rules in the budget on 30 October. Whitehall Insiders say she will make sure that they don’t stop billions of dollars from being invested into areas like the green energy transformation, roads and hospitals.Starmer cut the flagship green spending plan of Labour from £28bn per year to only £4.7bn due to the fragile state the public finances. Some of these cuts may now be reversed.

Starmer said there is a difference between borrowing money to finance day-today expenditure and using the public debt to fund investment. He claimed that this could help to grow the economy.He told the BBC that, on the sidelines of the UN General Assembly: “Borrowing, public investment and private investment must go hand in hand to act as a catalyst.”

His comments came at a time when the OECD (a think tank for 38 countries, mostly rich) urged the UK, to rewrite their “short-termists” fiscal rules, to allow greater public investment, which would drive growth. Alvaro Pereira is the chief economist of the OECD. He said that the fiscal rules may lead to a “deterioration in the public finances over time” given the need to upgrade Britain’s infrastructure as well as boost productivity.

Pereira says that the existing rules are based upon a rolling five year horizon. This gives ministers an opportunity to delay cutting day-today spending, but it makes it difficult to justify long-term investments. Reeves laid the groundwork for greater capital spending in a speech she gave at the Labour Party conference on Monday. She vowed to stop the “low investments that feed the decline”.

The government is considering several options to ease the restrictions on investment that are imposed by existing fiscal rules. These rules require debt as a percentage of GDP to decrease in five years. Reeves would like the Treasury to focus more on the benefits of investments, and less on the costs.

In order to do this, officials examine alternative measures of government balance sheets that reflect assets created through investment and not only liabilities. Researchers at the IMF have claimed that measures of government finances, such as net worth for the public sector, are “more conducive” to investments.

Treasury officials are also examining the public sector net financial liability, which includes a broader range of assets than government debt, and could increase budgetary room by a significant amount. The government wants to reflect better the assets and liabilities of state investment vehicles, such as the national wealth fund, Great British Energy or Great British Energy.

The government must be careful about the amount of extra borrowing it uses to invest, as it needs to maintain confidence in the financial markets. The government’s other major fiscal rule also places a heavy burden on it, as it is required to balance its budget after removing investment. Pereira’s comments came as the and OECD released new growth forecasts in major economies, which showed that the UK was among the better performers.

The OECD predicts that Britain’s GDP will grow by 1.2 percent in 2024, and by 1 percent in 2025. According to OECD projections, the UK’s inflation rate is expected to be higher than any other G7 country, averaging 2.7 percent in 2024, and 2.4 percent in 2025.

The OECD stated that global GDP growth has remained resilient, and is set to stabilize at 3.2 percent in 2024 and 2020.