Britain announces major change to fiscal rules to free up billions in spending

U.K. Finance Minister Rachel Reeves on Thursday confirmed she intends to change the country’s fiscal rules in the October budget, a move designed to free up billions of pounds for investment.

It brings an end to weeks of speculation ahead of the Labour government’s highly anticipated debut budget, which Reeves is scheduled to deliver on Oct. 30.

Prime Minister Keir Starmer has previously warned the budget is “going to be painful” and the government will have to make “big asks” of the public to address what it says is a “black hole” in public finances.

Writing in The Financial Times on Thursday, Reeves said her “investment rule” will “get debt falling as a proportion of our economy.”

She added that this change “will make space for increased investment in the fabric of our economy, and ensure we don’t see the falls in public sector investment that were planned under the last government.”

Reeves did not specify exactly what the investment rule would change, but it has been reported the Treasury could target public sector net financial liabilities (PSNFL) in the U.K.’s measure of debt, rather than public sector net debt.

The PSNFL measure takes in a wider account of the government’s balance sheet, including financial assets and liabilities, than public sector net debt.

A Treasury spokesperson declined to comment when asked whether the fiscal rule change would target PSNFL in the U.K.’s measure of debt.

The Institute for Fiscal Studies, an influential think tank, said on Sept. 30 that a change in the fiscal rules to target PSNFL would offer as much as £50 billion ($64.8 billion) of additional headroom for the government.

Reeves confirmed the change to Britain’s fiscal rules during a trip to the International Monetary Fund’s annual meetings in Washington.