UK's Starmer pledges more growth reforms after budget hit to markets


  • World
  • Saturday, 02 Nov 2024

FILE PHOTO: British Prime Minister Keir Starmer leaves 10 Downing Street on budget day in London, Britain October 30, 2024. REUTERS/Maja Smiejkowska/File Photo

LONDON (Reuters) -British Prime Minister Keir Starmer promised reforms to speed up the economy and overhaul the public sector after the Labour government's first budget failed to boost the growth outlook and sent government bond prices into a two-day dive.

Finance minister Rachel Reeves announced a plan on Wednesday that included big increases in tax, borrowing and spending, but Britain's budget watchdog judged that economic growth beyond next year would be weaker than it previously thought.

British government bond prices fell in the hours after her speech and again on Thursday, sending borrowing costs up sharply, before stabilising on Friday.

Writing in the Financial Times on Saturday, Starmer said the budget was a "first step on our mission for growth" but also opened the way for reform of "our creaking central state" and its public services as well as more private sector investment.

"Just as we cannot tax and spend our way to prosperity, nor can we simply spend our way to better public services," he wrote, addressing concerns that the health system and other services needed more than just extra cash to improve.

Some analysts have said that without reform the government may need to raise taxes again in future to fix the public sector, despite Reeves' pledge that her budget was intended to "wipe the slate clean".

Starmer listed plans to meet his promise to voters in July's election to double Britain's economic growth pace such as housing targets, planning system reforms, quicker approval of clean energy projects and a review of how regulators operate.

"This process involves detailed, often painstaking work. For that reason, it is not yet ready to be included in the OBR’s forecast for growth," he said, referring to the Office for Budget Responsibility whose forecasts underpin the budget.

"However, we should be optimistic about the potential," Starmer wrote, focusing on the importance of private sector investment alongside a big increase in public infrastructure spending.

The budget was quickly welcomed by the International Monetary Fund and on Saturday it also won applause from Mario Draghi, the former European Central Bank president who recently advised the European Union on how to boost competitiveness.

"The UK government has chosen to significantly raise public investment over the next five years and has adopted precise rules to ensure that borrowing is used only to fund this investment," he wrote also in the FT.

"Moreover, in order to ensure the quality of spending, transactions will be validated by independent authorities. This increases the likelihood that public investment has a positive net present value and so supports fiscal sustainability."

(Writing by William SchombergEditing by Angus MacSwan and Frances Kerry)

Follow us on our official WhatsApp channel for breaking news alerts and key updates!

Next In World

Roundup: Europe against new U.S. tariffs, wine, spirits industry concerned
Number of migrants stopped entering US from Canada drops to multi-year low
Weekly storage of natural gas in U.S. decreases: EIA
Mexico cooperating with U.S. but more work needed on drugs, says Rubio
Philippines' Duterte to have first hearing at ICC on Friday
Portugal's president disbands parliament, calls election on May 18
U.S. stocks close lower
U.S. to see significant severe weather into weekend
Ukraine's Zelenskiy says Putin does not want ceasefire
Mexicans hope uncovered mass grave sheds light on missing relatives

Others Also Read