Reeves Signals New Debt Metric for Investment Surge in UK Budget

Rachel Reeves, UK's finance minister, plans to alter the public debt measurement in the upcoming budget, enabling increased borrowing for investment. This aims to reverse previous investment cuts and ensure debt falls as a share of the economy. The approach maintains borrowing within government rules, while targeting long-term returns.

In a pivotal move, British finance minister Rachel Reeves has announced a forthcoming change in how public debt is measured, aimed at facilitating billions in additional investment. This alteration, to be detailed in next week's budget, seeks to reverse the predecessor government's cutbacks on public investment. Reeves, who assumed her role following Labour's election victory in July, intends to present these changes on October 30.

Speaking from Washington, where she attended meetings of the IMF and World Bank, Reeves expressed confidence that the new debt metrics would help realign government finances without unsettling markets. The proposed shift may replace the current public sector net debt measurement with one that considers financial liabilities, including assets like student loans, allowing more fiscal leeway for investment. Economists predict this could enable over 50 billion pounds ($65 billion) of extra borrowing potential.

Despite growing speculation, Reeves reassured that borrowing aimed at long-term investment will not entail increased day-to-day spending nor tax incentives. The statement comes amid rising costs on UK government bonds and cautious optimism from economic analysts. The realignment is part of an effort to balance fiscal prudence with necessary investments to circumvent economic decline, a goal underscored by the IMF.

(With inputs from agencies.)