"Treasury orthodoxy' makes a fiscal prisoner of Reeves

Loosen self-imposed rules, former ministers urge chancellor

- DAVID MADDOX ARCHIE MITCHELL KATE DEVLIN

Rachel Reeves has been urged by one of her former advisers to abandon Labour's commitment to the state pension triple lock, warning that the pledge is “bonkers” and risks hobbling the government’s ability to manage the economy.

Jim O’Neill, a former Treasury minister who quit the Conservatives and later advised Ms Reeves, warned the chancellor had “hemmed herself in” with unsustainable manifesto commitments ahead of Wednesday’s spring statement.

His comments come as senior economists and Labour figures warn that the government has “boxed itself in” with pledges not to raise major taxes or break the triple lock – which guarantees the state pension will rise by 2.5 per cent, average earnings, or inflation, whichever is highest.

Former Labour home secretary David Blunkett called on Ms Reeves to “loosen a little” the government’s self-imposed fiscal rules. Speaking to The Week in Westminster on BBC Radio 4 yesterday, he said: “This is Treasury orthodoxy and monetarism at its worst ... I would raise the self-imposed rule by at least £1015bn and spend a great chunk of it on what we did back in ’97 with the new deal for the unemployed.”

The interventions will add pressure on Ms Reeves as she prepares to outline the government’s plans amid a worsening economic outlook.

Government borrowing rose above forecasts last month, while the Office for Budget Responsibility is expected to halve productivity estimates. Growth projections have already been downgraded since the autumn Budget.