UK finance minister to stick to fiscal rules despite global turmoil
[LONDON] British finance minister Rachel Reeves said on Sunday (Mar 23) that she will stick to her fiscal rules despite global upheaval, raising the prospect of belt-tightening measures to meet her financial targets in a budget update this week.
In her first full budget last October, Reeves sought to show investors that she could be trusted with the public finances by announcing a rule 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 already by slower than expected economic growth and higher borrowing costs in financial markets. Furthermore, 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 said in an interview with Sky News television. “We’ll respond to the change and continue to meet our fiscal rules.”
Asked about possible spending cuts in her Spring Statement on Wednesday, Reeves said that public spending was still expected to rise by more than inflation each year of the current parliament, which is due to end in 2029.
“But as a government, we have to decide where that money is spent, and we want to spend it on our priorities,” she said.
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Reeves said 10,000 public sector jobs could be cut under a new plan to lower civil service costs by 15 per cent by the end of the decade and save over £2 billion (S$3.45 billion) a year, adding it was not right to keep Covid-era staffing increases.
More than 500,000 people work in the civil service.
With the economic growth outlook likely to be slashed on Wednesday, Britain hopes to avoid the brunt of import tariffs that the Trump administration is considering.
“President Trump is rightly concerned about countries that run large and persistent trade surpluses with the US. The UK is not one of those countries,” Reeves told the BBC on Sunday.
Asked whether Britain could offer to end its Digital Services Tax levied on large tech companies such as Google and Facebook to win favour in Washington Digital Services, Reeves said talks were ongoing.
“We’re in discussions at the moment around a whole range of things around tariffs with the United States but we will continue to operate on that principle that you should pay taxes in the country in which you operate,” she said.
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