By Paul Hannon


The U.K. is prepared to announce new measures to ensure it meets its fiscal rules in March, Treasury Chief Rachel Reeves said Thursday.

The left-of-center Labour Party set out its new rules in October, including a pledge to borrow only for investment and not to pay day-to-day bills by the fiscal year ending March 2030.

However, figures released Wednesday showed the government has been borrowing more than it had anticipated, while economists have warned that high interest rates and slow economic growth will make it difficult to stay within the rules over coming years.

In an interview with The Wall Street Journal on the sidelines of the World Economic Forum's annual gathering in Davos, Reeves said she may announce new measures to ensure compliance at a budget update scheduled for March 26.

"We will find ways to ensure we continue to meet those fiscal rules," Reeves told WSJ Editor-in-Chief Emma Tucker. "I'll set out the measures that are necessary, if they are necessary."

Reeves also said the government will review planned changes to the tax treatment of what are known as "non-domiciled" residents of the U.K. in response to criticisms from many of the wealthy individuals affected.

"We have been listening to the concerns that have been raised by the non-dom community," she said.

Reeves's October budget has been widely criticized by businesses for featuring a rise in a tax on employment to help fund an increase in spending. Reeves said she "hears" that criticism, but hasn't been presented with "any serious alternative" to steady the public finances.

"It wasn't the budget I wanted to deliver," Reeves said. "I had to make difficult decisions very early on."

However, Reeves said the government has demonstrated its support for business through a series of recent moves to ease regulation, including a delay to the implementation of new international banking rules.

"This is a proudly pro-business government," Reeves said.

Reeves said a planned reform of the U.K. pensions industry will help new businesses gain access to finance on better terms, addressing a weakness that sees many British startups turn to the U.S. for funding.

The U.K.'s treasury chief said boosting growth after a long period of meager expansion is the government's "number one mission." So far, the economy has shown little sign of the desired revival, although the International Monetary Fund on Friday raised its growth forecast for this year to 1.6% from 1.5%.

One potential threat to growth is a rise in barriers to trade around the world should U.S. President Trump press ahead with an increase in tariffs.

Reeves said that there is little reason for the U.S. to impose tariffs on imports from the U.K.

"The challenge that President Trump is trying to address is countries that run large surpluses," she said. "That is not the case with the U.K. We are not the problem that President Trump is trying to deal with."

In search of growth, the new government is also trying to build closer economic ties with the European Union, which the U.K. voted to leave in 2016.

However, Reeves said the government doesn't intend for the U.K. to become part of a Europe-wide customs union, and will instead seek a "bespoke" deal to improve trading conditions.


Write to Paul Hannon at paul.hannon@wsj.com


(END) Dow Jones Newswires

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