Rachel Reeves’s “pass-fail” fiscal rules leave Britain’s economic policy “entirely exposed” to global changes and could lead to a “costly distraction from the big issues”, economists have suggested.
Matthew Oulton, Research Economist at the Institute for Fiscal Studies, said: “Rachel Reeves has engineered a trap for herself, albeit in difficult circumstances. Aiming to meet inflexible, pass–fail fiscal targets by the slimmest of margins was a risky strategy from the outset.”
The Chancellor is more likely to make cuts in her Spring Statement than to push through until the autumn budget if an updated forecast puts her on track to break her promises, a think tank has said.
The Treasury has committed to delivering only one major fiscal event a year but the prospect of missing her own targets at the first hurdle could see Reeves intervene earlier, the IFS added.
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Sort: Newest first Oldest first March 6, 2025 7:37 am‘Pass-fail’ fiscal rules mean UK economic policy exposed to global changes, IFS warns
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Rachel Reeves’ “pass-fail” fiscal rules leave Britain’s economic policy “entirely exposed” to global changes and could lead to a “costly distraction from the big issues”, economists have suggested.
The Chancellor is more likely to make cuts in her Spring Statement than to push through until the autumn budget if an updated forecast puts her on track to break her promises, a think tank has said.
The Treasury has committed to delivering only one major fiscal event a year but the prospect of missing her own targets at the first hurdle could see Ms Reeves intervene earlier, the Institute for Fiscal Studies said.
The Chancellor has set two self-imposed rules as she seeks to stabilise the public finances – firstly that day-to-day spending must be paid for by revenue, not borrowing, and secondly to have debt falling as a share of national income by 2028/29.
At the time of the budget in October, the Office for Budget Responsibility (OBR) said she had left herself £9.9 billion of headroom against the first rule.
The watchdog’s updated forecast next month is likely to see that wiped out because of higher borrowing costs and weak growth in Britain, as well as global factors such as trade tariffs following Donald Trump’s election.
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