Rachel Reeves Sets Fiscal Guardrails for UK's Future

British finance minister Rachel Reeves plans to introduce borrowing guardrails in her first budget, aiming for prudent investments while managing debt. Investors are wary of increased debt despite a focus on net-zero economy growth. Reeves aims to boost confidence and transparency in public finances.

British finance minister Rachel Reeves has announced the introduction of "guardrails" to ensure responsible borrowing in her upcoming budget. The move aims to reassure investors of rising public debt, promising long-term, prudent investments. Reeves emphasized the necessity of oversight to maintain financial stability.

Scheduled to present her inaugural tax-and-spending budget on October 30, part of Prime Minister Keir Starmer's Labour government, Reeves is focusing on ramping up investment in infrastructure and the net-zero transition. With public debt near 100% of GDP, her decisions on borrowing and tax increases are under scrutiny.

The recent rise in British gilt yields highlights investor concerns about additional debt, as does consumer unease over a potentially tough budget. Reeves noted lessons from former Prime Minister Liz Truss's unfunded tax cuts and stressed the use of fiscal institutions to validate public investments' impact on growth.

(With inputs from agencies.)