Reeves says Labour has rebuilt UK headroom to £9.9 billion

[LONDON] Chancellor of the Exchequer Rachel Reeves said she has entirely rebuilt the UK’s budget buffer with a series of cuts.

Reeves said on Wednesday (Mar 26) that the UK would be £4.1 billion (S$7.07 billion) in deficit in 2029-30 if she had not taken new measures in her spring economic update. After her cuts, the headroom was fully restored to £9.9 billion, according to the Office for Budget Responsibility.

“There is nothing progressive about working people paying the price of economic irresponsibility,” Reeves said. “The British people put their trust in this government because they knew that we would never take risks with the public finances.”

The chancellor has cut back government expenditure to ensure she meets her key fiscal rule, which requires day-to-day spending to be covered by tax receipts in the years ahead. Her previous headroom was wiped out by growth downgrades and higher borrowing costs.

The pound held on to earlier losses, while gilt yields remained lower as Reeves spoke. They had both fallen after UK inflation data earlier on Wednesday came in softer than economists had forecast.

The pound traded 0.3 per cent weaker at US$1.29 while 10-year gilt yields were three basis points lower at 4.73 per cent. BLOOMBERG