Mortgages rates are not rising yet but Reeves has to act

The problem of servicing higher interest payments on the national debt increases the likelihood of the Treasury making plans for an adjustment, based on a squeeze on spending. A £10bn cut will hurt, but with a majority of 170 MPs in the House of Commons, and an ongoing spending review already in train, it can be done.

In these circumstances, with the credible threat of a global trade war, for example, it should be noted that Rachel Reeves’ new fiscal rules do have an escape hatch.

In the event of “an emergency of a significant negative economic shock to the economy” the chancellor may “temporarily suspend the fiscal mandate”.

While a global trade war could qualify, it would be difficult optics to suspend a “non-negotiable” and “iron-clad” set of rules before they had really bitten. The rules have not yet formally passed into law yet either, and remain a “draft” until the Commons votes to approve them.

It seems very unlikely that this route will be taken unless there is a very clear economic shock in the coming weeks.

The bigger point here is what matters in the markets, which is whether the UK is pursuing a credible set of policies, a convincing overall strategy.

Labour’s focus on stability at all costs was understandable after the humiliation of Liz Truss’s mini-Budget. But “stability” is not a growth strategy.

Pursuing green growth by borrowing for long-term capital investment is a potential strategy, and it underpinned “Bidenomics” in the US. The incoming government embraced the rhetoric of US policy under the outgoing president, without the same firepower. “Bidenomics without the money”, you might say.

But now the new Trump administration is jettisoning this approach, rightly or wrongly, and the markets are less convinced that such a strategy will pay for itself. It will cost more to fund such a strategy, and require harsher trade-offs than expected.

Bidenomics without the money and without Biden is much too thin. A more detailed strategy for sustained growth is needed, and in short order.