Britain’s Finance Minister Rachel Reeves on Wednesday announced a new fiscal target to reduce government debt, called an “investment rule”, designed to give the government more leeway in borrowing for investment. Is.
Reeves said the government would now target public sector net financial liabilities (PSNFL), which excludes the Bank of England, rather than public sector net debt (PSND), with the aim of reducing it as a share of the economy.
The debt reduction rule will be implemented in the 2029/30 financial year, unless that year becomes the third year of the budget forecast. From that point on, the PSFNL will fall in the third year of each forecast, Reeves said.
The previous rule of reducing public sector net debt was a rolling target for the fifth year of the forecast, meaning debt reduction plans were repeatedly delayed by previous governments.
PSNFL is a broader measure of the state’s balance sheet than PSND. It takes into account illiquid public sector assets such as pension funds, and provides a more comprehensive measure of the student loan portfolio.
This would work in conjunction with Reeves’s other fiscal goal, the “Stability Rule”, designed to keep the current budget deficit under control, which measures the difference between daily revenues and expenditures.
Reeves said his “stability” rule would balance the current budget by the 2029/30 fiscal year. From there, the government will commit to executing a balanced budget in the third year of each forecast.
“This will place a tight constraint on day-to-day spending… so that difficult decisions cannot be continually put off or avoided,” Reeves said in his budget speech, the first under the new Labor government.
Citing new projections from the Office for Budget Responsibility, he predicted the country’s budget deficit would be £26.2 billion ($33.91 billion) in the 2025/26 financial year.
This would result in a surplus of £10.9 billion in 2027/28, he said.
