Reeves plans economic ‘reset’ in upcoming budget

RACHEL Reeves stated that her upcoming budget will be an opportunity to reset the UK’s economy and boost investment, ahead of meetings with international partners in Washington on Thursday.

The chancellor is attending the International Monetary Fund (IMF) and World Bank annual meetings during a two-day trip, just days before presenting the Labour Party’s first budget in 14 years.

Last week, government sources indicated that Reeves aims to raise around £30 billion through a mix of tax increases and limited public spending cuts to improve public services and address a budget deficit left by the previous government.

The Guardian reported that Reeves is also expected to discuss changes to fiscal rules that limit government borrowing during the IMF meetings. A Treasury spokesperson declined to comment on the report, saying they do not address budget speculation.

"I'll be in Washington to tell the world that our upcoming budget will be a reset for our economy as we invest in the foundations of future growth," Reeves said in a statement marking the start of her trip. "It's from this solid base that we will be able to best represent British interests and show leadership on major issues like the conflicts in the Middle East and Ukraine."

Earlier this week, the UK announced it would lend £2.3 billion to Ukraine for the purchase of weapons, part of a broader loan from the Group of Seven nations, supported by frozen Russian central bank assets.

The finance ministry added that Reeves will support proposals in Washington to expand development financing for poorer countries and push for greater transparency from G20 countries about their debt levels.

On Tuesday, the IMF raised its 2024 growth forecast for Britain more than any other G7 nation. However, growth is still projected to be 1.1 per cent in 2024 and 1.5 per cent in 2025, which remains modest compared to historical levels.

The IMF also warned that the UK, like other G7 countries, needs to control rising public debt.

Reeves is reportedly considering adjustments to the budget rules to make it easier to finance public investment, potentially by redefining public debt. This could involve a shift towards public sector net financial liabilities, which allows illiquid financial assets to count against debt, as opposed to the current focus on public sector net debt, excluding the Bank of England.

The Institute for Fiscal Studies has previously estimated that such a change could allow an additional £38.5 billion in borrowing.

(With inputs from Reuters)