Rachel Reeves has been warned that its plans could lead to the collapse of the British economy.

Ms Reeves confirmed on Thursday (October 24) a technical change in how she would measure progress against the Labor government’s debt management target.

Nick Winters, partner at Blick Rothenberg, warned that taxpayers would still be saddled with increased borrowing and borrowing costs which will need to be repaid over time, with interest.

He added: “At some point she will have to raise taxes further or risk widening the £22 billion fiscal ‘black hole’, which, given the tax increases already proposed in the Budget, is a frightening possibility. »

Mr Winters said News from the sky the change may represent an immediate ‘win’ for the chancellor, but the UK economy can only make so many changes before it ‘collapses’.

Under the current proposal, the Chancellor should target Public Sector Net Financial Liabilities (PSNFL) as the new benchmark for public debt rather than the current measure of underlying public sector net debt.

Ms Reeves’ move to PSNFL would give her greater leeway to achieve her debt reduction target, as it includes a broader mix of state assets and liabilities – including notably expected repayments from student loans to offset part of the liabilities.

If the PSNFL had been used as a debt target in the March 2024 Budget, the “margin” – the margin by which the fiscal rule is met – would have increased by £53 billion, according to the Institute for Fiscal Studies .

Shadow Chancellor Jeremy Hunt said the constant advice he received from Treasury officials during his time as chancellor was always that increased borrowing meant interest rate would be higher for longer and would penalize families with mortgage loans.

He added: “What is even more remarkable is that the Chancellor has not seen fit to announce this major change to the budgetary rules to Parliament. The markets are watching.”

The prospect of tens of billions of pounds of additional government borrowing sent government bond yields up as much as eight basis points on Thursday.

It is thought this could lead to Threadneedle Street curbing cuts in interest ratewhich has an impact on British gilts by lowering prices, which conversely causes their yield to rise.

Gilts are also said to be under pressure after Bank of England Governor Andrew Bailey said on Wednesday (October 23) that questions remained over whether elements of inflation could remain stubborn in the economy.

Ms Reeves, writing in the Financial Times, said her fiscal rules will be “the rock of stability” at the heart of her October 30 budget.

Labor’s platform for the 2024 general election said Ms Reeves would follow two rules: the current budget would be balanced so that day-to-day costs would be covered by revenue; The second rule is that the debt should decline as a proportion of the economy by the fifth year of the economic forecast.

Ms Reeves said: “My budget rules will do two things. The first and most important: my rule of stability will mean that daily expenses will be offset by income.

“Given the state of public finances and the need to invest in our public services, this rule will be the most severe.

“Alongside tough decisions on spending and welfare, this means taxes will have to rise to ensure compliance. I will always protect workers when making these choices, while taking a balanced approach.”

She added that, “crucially”, her stability rule will also cover interest on the UK national debt and that, unlike the previous government, it will not cut capital budgets to make up for deficits in departments’ day-to-day running costs .

Ms. Reeves continued: “My second fiscal rule, the investment rule, will reduce debt as a proportion of our economy. This will leave room for increased investment in the fabric of our economy and ensure that we do not see a decline in the public sector. investments that were planned under the last government.