FirstFT: Labour’s fiscal rules pledge

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Good morning. Rachel Reeves, the UK shadow chancellor, on Tuesday pledged a Labour government would aim to borrow only to invest, echoing the fiscal rules of former Labour chancellor Gordon Brown.

Reeves said her rules would ensure “the current budget must move into balance so that day-to-day costs are met by revenues”, but a union leader denounced her economic plan as too timid and “for the birds”.

The shadow chancellor confirmed in her Mais lecture in the City of London that Labour would also match Prime Minister Rishi Sunak’s fiscal rule that overall public debt should fall year on year as a share of gross domestic product by the fifth year of official forecasts.

The rolling target, which is always five years away, has been criticised by economists. Institute for Fiscal Studies director Paul Johnson said Reeves’s rules would be “identical in effect” to those being followed by the current chancellor, Jeremy Hunt.

“A rule that debt should be falling in the fifth year of the forecast period is about as loose as a debt rule can be,” Johnson said. Read more about Labour’s fiscal rules.

• Dyson dust-up: UK chancellor Jeremy Hunt has told entrepreneur Sir James Dyson that he should run for parliament if he believes he could do a better job than the government, people familiar with the “fiery” meeting said.

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Here’s what I’m watching today:

• Economic data: The UK has February inflation data, while the EU publishes its latest consumer confidence indicator.

• Federal Reserve: The US central bank announces its interest rate decision.

• Results: BioNTech, Computacenter and Prudential report, while South Africa’s Investec releases a pre-close trading update.

Five more top stories

1. The head of Europe’s largest munitions maker has said EU leaders should consider installing short-range air defence systems similar to Israel’s Iron Dome. The comments by Armin Papperger, chief executive of Rheinmetall, come as EU capitals are boosting military spending amid increased fears of Russia’s threat to the continent. Papperger said short-range air defence was “something they want to create in Europe”. Read more from his interview with the Financial Times.

2. Investors are buying up European travel, retail and luxury goods shares, betting that a rebound in the region’s economy will tempt consumers to spend more on holidays and expensive items. Fund managers have bet that pessimism over European economic growth is overdone, and their enthusiasm for stocks linked to discretionary spending has in part been driven by growing confidence that central banks have successfully tamed inflation without pushing economies into a downturn.

3. Leading European and UK artificial intelligence start-ups have been lobbied to move their headquarters to rival nations, as they become targets in a global competition to develop cutting-edge technology. Germany’s Aleph Alpha and UK-based Synthesia and StabilityAI are among the fledgling AI companies that have been approached with offers of subsidies, lenient tax regimes and light-touch regulation by officials from Canada and the UAE. Read more about the overtures.

• Big Tech: Microsoft has hired Mustafa Suleyman, the co-founder of Google’s DeepMind and chief executive of artificial intelligence start-up Inflection, to run a new consumer AI unit.

4. Zambia’s leader has urged China and the bankrupt nation’s other creditors to end the stand-off over its $13bn debt restructuring. President Hakainde Hichilema called the delay “an indictment” of the credibility of the global system as the southern African country has become a symbol of the failures of the G20-endorsed common framework meant to expedite solutions to debt crises in poor countries. Beijing, its single biggest creditor, has objected to a deal Zambia had reached with private bondholders.

5. Sanctions levied on Israeli settlers have barely scratched a movement that is feeling more empowered and emboldened more than five months into Israel’s offensive in Gaza. The UK and US imposed curbs on seven individuals last month, the first time that settlers in the occupied West Bank had been targeted in this way, and further US sanctions, adding one new name to the list, were introduced on March 14. Polina Ivanova has more from the West Bank.

The Big Read

In 2019, eager to make Brexit a reality, UK voters were won over by Boris Johnson’s promise to get the job done. The Conservatives went on to seize from Labour a series of largely working class post-industrial seats across northern England, the Midlands and north Wales — the so-called red wall — in a seismic shock to Britain’s political norms. But fast forward more than four years and the Conservatives, having ejected Johnson as leader in 2022, are struggling to cling on to many of the 50 or so red wall seats.

We’re also reading and listening to . . . 

• ‘Orwellian doublethink’: When historians look back at Wall Street’s response to climate change in the 2020s, they will see much that looks deeply unwise, writes Pilita Clark.

• Financial plumbing: As the US prepares to cut settlement time for trades from two days to one, the apparently minor upgrade will put the ecosystem under another layer of costly strain and further cement US dominance, writes Katie Martin.

• Unhedged and Behind the Money 🎧: Our podcasts join forces to answer listener questions, featuring hosts Ethan Wu and Michela Tindera, plus US financial commentator Rob Armstrong and markets editor Katie Martin.

Chart of the day

US consumers paid almost 50 per cent more in credit card expenses last year than in 2020, the year before President Joe Biden took office, putting pressure on family budgets and firing up an election issue. Data shows that credit card interest and fees increased by $51bn in that time to $157bn, with delinquencies on credit card loans running at their highest level in almost 13 years.

Take a break from the news

There is no shortage of great books on the race for the White House and the state of the US presidency and politics in general. But here is a selection of some of the best books recommended by FT specialists on the history and global consequences of the US elections.

Additional contributions from Benjamin Wilhelm