By Alexander Smith
DAVOS, Switzerland (Reuters) -British finance minister Rachel Reeves told Reuters on Thursday that she will announce changes if necessary in March to meet her fiscal rules, but added that it was important not to “jump the gun” with two months still to go.
“We’ve asked the independent Office of Budget Responsibility to do a forecast that will be published on March 26 and at that point, I’ll be setting out any changes that are necessary,” Reeves said in an interview on the sidelines of the World Economic Forum’s annual meeting in Davos, Switzerland.
“I don’t think we should jump the gun. (There’s) another two months before the OBR produce their forecast.”
Media reports have previously said Reeves is more likely to cut spending rather than raise taxes after a sharp increase in social security contributions paid by employers, which she announced last year and is due to start in April.
Earlier this month, a sharp sell-off in British government bonds, driven to a large degree by shifts in U.S. interest rate expectations ahead of the inauguration of President Donald Trump, forced Reeves to say she would act to meet her fiscal rules if needed.
Market borrowing costs have fallen back in the last week and as of Thursday, British gilts were the third best-performing bonds among the Group of Seven countries this year.
“Just looking at what’s happened year to date, we’re in line with our peers to just look at bond yields,” Reeves said.
On the spike in yields earlier in the month, Reeves said: “It’s not a UK phenomenon. It’s not a targeting of the UK.”
BALANCING SPENDING AND REVENUE
Since her Oct. 30 budget that raised borrowing and increased tax on employers to restore public services and investment, economic data has largely turned against Reeves, adding to the likelihood that she will need to do more to meet her rules.
These include balancing day-to-day spending with revenues by the end of the decade and for public sector net financial liabilities to fall as a proportion of gross domestic product.
“We are taking out those barriers that have stopped businesses investing and growing in Britain,” Reeves said. “I am confident that we can get those growth numbers up.”
Earlier this week, Reeves forced out the chairman of the country’s competition watchdog, saying he did not agree with her views on how to speed up the country’s slow-moving economy.
“We asked all regulators to tell us what they could do to go further and faster to regulate for growth, not just for risk. Some have responded more positively than others,” Reeves said.
Asked if her approach gave the impression that British regulators would no longer challenge businesses, Reeves said regulators were still independent, but had to take economic growth into account.
“A number of the regulators we feel are stepping up to that plate,” Reeves said, citing the Bank of England’s decision to delay tougher new bank capital rules as an example.
She also listed other measures including Thursday’s announcement by the government of plans to limit the number of legal challenges that opponents of infrastructure can bring and a proposal to avoid delays to construction projects due to nature conservation concerns.
(Reporting by Alexander Smith, writing by Andy BruceEditing by William Schomberg and Sharon Singleton)
