Britain’s government will stick to its fiscal rules despite global upheaval, finance minister Rachel Reeves said yesterday, raising the prospect of belt-tightening measures to meet her targets for the public finances in a budget update this week.
In her first full budget last October, Reeves sought to win the trust of investors by pledging to bring day-to-day spending into balance with tax revenue by the end of the decade.
But she is believed to have been knocked off course by slow economic growth and higher borrowing costs. A potential global trade war triggered by US President Donald Trump’s import tariffs has led to downgrades to the international outlook.
“The world has changed. We can all see that before our eyes and governments are not inactive in that,” Reeves told Sky News. “We’ll respond to the change and continue to meet our fiscal rules.”
On Friday, British debt costs jumped after higher-than-expected borrowing figures, showing nervousness among investors about the ability of Prime Minister Keir Starmer’s government to fix the public finances with the economy stuck in a slow gear.
Last week, the government announced cuts to welfare spending to save around £5 billion ($6.5bn) a year, angering some legislators in Starmer’s centre-left Labour Party. Reeves is expected to announce further measures in her Spring Statement on Wednesday to restore her £10bn of room for manoeuvre to meet her fiscal targets.
Asked by Sky News about possible spending cuts, Reeves said public spending was still expected to outpace inflation in each year of the current parliament. “But as a government, we have to decide where that money is spent, and we want to spend it on our priorities,” she said.
The government has increased spending on defence in response to Trump’s calls on Europe to do more to protect its own security. Further increases are planned for the coming years.
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