Rishi Sunak investment rules leaving UK lagging behind other nations, claims Labour

Rishi Sunak's rules capping the level of state investment are holding back economic growth and leaving Britain lagging behind other leading nations, Labour has claimed.

The Chancellor has set new fiscal rules allowing the UK Government to borrow up to 3 per cent of GDP in order to invest, while balancing the books on day-to-day funding.

He is adamant that setting a maximum level of borrowing is essential to shoring up confidence in the public finances.

But Labour has pointed to the most recent data from the OECD club of developed economies, showing that the UK has less investment in proportion to the size of its economy than almost any other country, ahead of only Luxembourg and Greece.

Chancellor of the Exchequer Rishi Sunak. Picture: PA

Rachel Reeves, Labour's shadow Chancellor, said the fiscal rules should be changed to remove the public investment cap. She said: "We should be using our recovery to grow our economy.

"Labour’s fiscal rules mean we will have a strong handle on public finances, while our ambitious climate investment pledges means we can invest in boosting businesses, creating jobs, and getting our economy firing on all cylinders.

"The Government’s short-sighted cap on investment won’t just make their low growth, high tax trap worse – it’ll hamper British businesses that hold the key to our economic prosperity and security."

Tony Danker, head of the CBI business group, recently called on the state to provide "foundational and catalytic public investments" in infrastructure and new technology which risks being neglected if it is left to the private sector alone.

A Treasury spokesperson said: “We can’t pile on endless debt for future generations to deal with. Keeping investment spending below 3 per cent of GDP balances getting debt down while investing in the future of the UK.

"The Government plans to invest over £600 billion over this Parliament, the highest sustained level of investment for nearly half a century.

"And we’re also supporting businesses to invest, including through the super-deduction – the biggest business tax cut in modern British history."

The British Chambers of Commerce revealed earlier this week that many respondents to its quarterly survey of almost 5,500 firms had conceded they were running low on cash and had ditched investment plans to stay afloat into the new year.