Reeves said that she wanted to reverse cuts to public investment planned by the previous Conservative government when she presents her first budget statement on October 30
British finance minister Rachel Reeves will change the measure of public debt that the government targets in next week’s budget to allow billions of pounds of more borrowing for investment.
Reeves – whose Labour Party won a sweeping election victory in July – said on Thursday that she wanted to reverse cuts to public investment planned by the previous Conservative government when she presents her first budget statement on October 30.
I can confirm today that we will be changing the way that we measure debt in the budget statement next week, but I’ll set out the details of that to parliament, Reeves told reporters in Washington where she is attending annual meetings of the International Monetary Fund (IMF) and World Bank.
We will get debt falling as a share of our economy during this parliament, but the changes that we will make to the investment rule will free up money to invest in things that will deliver a long term return, she said.
The statement is the latest in a series of indications from Reeves about how she wants more flexibility to borrow to finance investment within the government’s budget rules, but with appropriate guard rails to avoid spooking markets.
Reeves refused to say what measure would replace the current target of public sector net debt excluding the BoE, which was introduced in 2022.
On Wednesday the Guardian newspaper reported that Reeves would target public sector net financial liabilities, which allow assets like student loans to be offset against public debt.
Economists estimate that had this measure been in place in March, it would have created scope for more than £50 billion of extra borrowing, equivalent to about 1.5% of Britain’s annual economic output.
Reeves said she would not seek to use all the headroom created by the change.