Britain's Labour government to deliver debut Budget this week, settling weeks of uncertainty

LONDON — U.K. Finance Minister Rachel Reeves will deliver the government's hotly awaited debut budget on Wednesday, putting to bed weeks of uncertainty over potential tax hikes and spending cuts.

The fiscal announcement — Labour's first in almost 15 years — has been the source of much speculation, with Prime Minister Keir Starmer warning of "painful" decisions as his administration seeks to square what it says is a "black hole" in the public finances with its wider pro-growth agenda.

Reeves brought some clarity to that narrative on Thursday, by confirming that she would use her budget to announce a widely anticipated change to the U.K.'s debt rules in a bid to free up billions of pounds for investment. However, she did not specify exactly what the investment rule would change.

"We will measure debt differently. But, of course, we will put guardrails in place," Reeves told Sky News Thursday, following her initial announcement in the Financial Times.

Reports suggest that the Treasury could target public sector net financial liabilities (PSNFL) in the U.K.'s measure of debt, rather than public sector net debt. The PSNFL measure takes in a wider account of the government's balance sheet, including financial assets and liabilities, than public sector net debt. The Treasury declined to comment on the proposals.

In a note Friday, Goldman Sachs estimated that the changes could increase the government's fiscal headroom by around £50 billion ($65 billion). Still, Goldman Sachs noted that the Treasury was unlikely to use all of that added leeway, and that any increase would be phased in gradually "over several years."

"We think that the Chancellor would be very unlikely to use all the resulting fiscal space and would instead leave a much