UK’s Reeves redesigns rule to get government debt falling
LONDON (Reuters) – British finance minister Rachel Reeves on Wednesday announced a new fiscal target to have government debt falling, called the “investment rule”, designed to give the government more leeway to borrow for investment.
Reeves said the government will now target public sector net financial liabilities (PSNFL) rather than public sector net debt (PSND) excluding the Bank of England, with the aim to get it falling as a share of the economy.
The rule of getting debt falling will apply in the 2029/30 financial year, until that year becomes the third year of the budget forecast. From that point, PSFNL will fall in the third year of every forecast, Reeves said.
The previous rule for lowering public sector net debt was a rolling target for the fifth year of the forecast, meaning plans to have debt falling were repeatedly pushed back further 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 offers a more comprehensive measurement of the student loan book.
It will work in tandem with Reeves’ other fiscal target, the “stability rule”, which is designed to keep in check the current budget deficit, which measures the difference between revenues and day-to-day spending.
