Rachel Reeves faces the challenge of not sending gold markets into panic, says ALEX BRUMMER

The chancellor used her first appearance at the International Monetary Fund to gain global buy-in for next week’s budget.

Rachel Reeves studiously dodged questions about plans to put pressure on private sector pensions by imposing national insurance on company contributions.

She simply stated that she was determined to free up pension money to invest in infrastructure and start-ups.

It is unclear how she, like her Labor predecessor Gordon Brown, taxes pension savings.

The main purpose of the visit so far is to buy IMF cover for major changes in fiscal rules.

Her decision to enforce a ‘stability rule’, under which current spending must be paid from tax revenues, means that major tax increases are in the pipeline and will likely be implemented even sooner.

The radical starting point is the change in the debt rule. Reeves wants to give himself more than £50 billion in additional investment space by moving the goalposts.

A range of public liabilities, including funding the Bank of England’s losses on the National Wealth Fund’s purchases of bonds, student loans and investments, will be left out of the debt calculations.

A new measure – the net financial obligations of the public sector – has the support of the IMF, which recommends more public investment, according to Reeves.

The Office for Budget Responsibility, which has seen the proposals, must have signed off on it.

As with any major change in public finances, the acid test will come from the government bond markets, which run ahead of the budget, as Liz Truss has learned to her regret.

The Chancellor vows that strong ‘guardrails’ will be put in place to ensure all public investment projects deliver value for money.

Given the experience with HS2, the Elizabeth Line and many more, that’s a huge ask.

There is also a risk that as money piles into government projects, funding for innovative private sector schemes could be crowded out. Worrying.

Rate cheering

Andrew Bailey’s appearances before the club of top bankers – the Institute of International Finance – have become part of Washington mythology.

Two years ago, in this setting, Bailey revealed that he had been involved in an overnight operation to save Britain’s pension systems, which were in jeopardy due to the use of liability-based investments.

His manner, the deadline set for resolving the cases and the scale of the crisis caused by Truss’s tax cut budget caused the pound to fall and government bond yields to soar while he was still talking.

This year the performance was drier. A now downsized governor was convinced that the inflation dragon had been slain peacefully, much faster than expected, and that the path to lower interest rates was much clearer.

The question for markets is how much confidence to place in the Bank of England governor’s reflections. In the spring, Bailey argued that inflation in the US and Europe (including Britain) was different.

In the US, a growing economy meant that higher prices were persistent. In Britain and the EU, the cost of living was driven by supply-side events, most notably Russia’s war against Ukraine. Once energy prices fell, financing costs could fall.

Despite the optimism, the Bank of England’s interest rate has been cut only once, from 5.25 percent to 5 percent.

In contrast, the European Central Bank has cut interest rates three times by a quarter of a percentage point, and the Federal Reserve by half a percentage point. The banks’ interest rate setters were behind the curve.

The biggest threat is geopolitical uncertainty and a possible energy price shock. But despite the volatility, oil prices are stable. Excuses for not doing the right thing and giving homeowners, consumers and businesses a break are falling away.

Brass plate

When England play Liechtenstein in football, the debate is usually about how many goals the pampered big league stars will go past the plasterers and lawyers of the tiny state of just 27,000 inhabitants.

But not too small to join the economic first division, with Prime Minister Daniel Risch having signed up as the 191st member of the IMF. Perhaps the truth about the late tycoon Robert Maxwell’s hidden millions will finally come to light.