Major pension funds urge UK to change fiscal rule

Pension funds

The call comes as finance minister Rachel Reeves prepares to present the Labour Party’s first budget on October 30 since it won power in a July election with promises to get Britain’s economy growing more quickly

Major pension funds have called on the UK government to overhaul one of its fiscal rules in its budget later this month, adding to growing calls for the country to encourage more investment in infrastructure and green technology.

The call comes as finance minister Rachel Reeves prepares to present the Labour Party’s first budget on October 30 since it won power in a July election with promises to get Britain’s economy growing more quickly.

The UK government will host a high-profile meeting next Monday with international investors whose cash they will need to help fund projects.

Australian pension fund IFM Investors, which manages nearly $146 billion of assets globally, made its recommendation in a report published on Wednesday, which it said was backed by other funds including Britain’s Universities Superannuation Scheme.

The report urges Britain to adapt a fiscal rule for calculating public sector debt to allow for investment by public infrastructure bodies to be counted on the asset side of the balance sheet.

Currently borrowing used to finance these bodies is counted towards debt, but the value of their illiquid financial assets, equity stakes and infrastructure holdings is not treated as an asset.

In our view, this does not make economic sense and may be a barrier to investments, the report said.

Reeves has previously said it is important to count the benefits of public investment as well as its costs in the context of the fiscal rules, without giving further details.

A spokesperson for Britain’s finance ministry said the budget would be built on economic stability, including robust fiscal rules. The ministry also said the upcoming investment summit would “bring together investors from around the world to show what the UK has to offer”.

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