Rachel Reeves will turn on the spending taps to upgrade Britain’s creaking infrastructure and invest in the clean energy transition, she will tell world leaders today.
The chancellor is planning to change the government’s fiscal rules to free up billions of pounds of borrowing, which she will promise to spend laying “the foundations of future growth”.
Attending her first International Monetary Fund (IMF) annual meeting, Ms Reeves will set the stage for next Wednesday’s Budget – which is also set to contain harsh spending cuts and tax hikes.
Promising to restore stability to the public finances, Ms Reeves will tell world leaders the Budget “will be a reset for our economy”.
Ahead of the trip, she said: “A Britain built on the rock of economic stability is a Britain that is a strong and credible international partner. I’ll be in Washington to tell the world that our upcoming Budget will be a reset for our economy as we invest in the foundations of future growth.
“It’s from this solid base that we will be able to best represent British interests and show leadership on major issues like the conflicts in the Middle East and Ukraine.”
Ms Reeves was handed a pre-Budget boost by the IMF, which on Tuesday upgraded its 2024 growth forecast for the UK economy.
It said UK gross domestic product (GDP) is due to grow by 1.1 per cent, a significant upgrade after predicting 0.7 per cent growth in July.
But the IMF’s chief economist Pierre-Olivier Gourinchas said countries should tread a “narrow path in terms of fiscal consolidation”, after being asked about reports the Chancellor is considering changes to fiscal rules which could allow the state to borrow more.
He added that countries should not do “too much too quickly” in relation to tax and spending decisions in order to maintain stability.
Ms Reeves is preparing to unveil tax increases and spending cuts of around £40bn a year as she seeks to fill a black hole in the public finances while also offering a much-needed boost to public services including the NHS.
The scale of the cuts has led to a cabinet rebellion, with deputy PM Angela Rayner and ministers Louise Haigh and Shabana Mahmood pushing back against Ms Reeves’ Budget plans.
An increase in employer national insurance contributions is widely expected, while potential capital gains and inheritance tax changes have been rumoured.
In Washington, Ms Reeves will attend G7, G20 and IMF meetings to discuss global economic issues.
She will support proposals to expand financing for countries to meet the United Nations’ Sustainable Development Goals and tackle unsustainable debt.
She will also press for all G20 countries to meet G20 best practices on debt transparency and move swiftly to implement support for countries facing pressing liquidity problems.
In an interview ahead of the meeting, Ms Reeves told the BBC she messages former chancellor Jeremy Hunt and is in contact “regularly” with Gordon Brown and Sir Tony Blair.
And she said she “would love to be able to” speak to Labour’s last chancellor Alistair Darling, who died last year, ahead of her first Budget as chancellor.
Speaking to BBC Radio 5 Live on Wednesday, Ms Reeves said her and Mr Hunt “do WhatsApp each other”.
“I think we’ve always had a good relationship,” she added.
“I may not be particularly impressed with the state of the public finances that he left me, but I do recognise that after Kwasi Kwarteng he had a tough job to do as well.”
Ms Reeves will be looking to raise up to £40 billion from tax hikes and spending cuts in order to avoid a return to austerity in next Wednesday’s fiscal statement.
Former prime minister Gordon Brown served as chancellor under Sir Tony between 1997 and 2007, and was in Number 10 during the financial crisis in 2008.
Ms Reeves said: “I speak to Gordon regularly, I also speak to Tony Blair regularly.
“The person I actually would love to be able to pick up the phone to now would be Alistair Darling (…) the last Labour chancellor to deliver a Budget.
“He died last November, at the end of last year. But I hope that he would be proud of what I’m doing as the next Labour chancellor after him.”
Ms Reeves also told the programme that she has got a cat called Pumpkin following “pressure” from her children.
Earlier this year, Sir Keir Starmer confirmed that he had got a new pet Siberian kitten named Prince after “negotiating” with his children.