Why IFS wants chancellor to overhaul her fiscal rules

The Institute for Fiscal Studies (IFS) says the chancellor's fiscal rules are “dysfunctional” — which may come as not much of a surprise even to the lay observer of Rachel Reeves's time in office.

- SEAN O'GRADY

It says the “aggressive ‘gaming’ of rolling targets and frequent changes to the rules have undermined their credibility... nor is the framework delivering on its promise of sustainable public finances”. In short, Reeves has been cheating a bit and the IFS would like to see the rather crude pass/fail system replaced by a more nuanced approach...

Why is the IFS saying this now?

The economic watchdog has an eye on 3 March and what is now called the spring statement, made by the chancellor in the Commons in response to the latest forecasts by the official (but operationally independent) Office for Budget Responsibility (OBR). In contrast to past such fiscal events, this was intended to be a low-key occasion. Crucially, the OBR will no longer be asked to say if Reeves is on track to meet her fiscal rules; that will now happen only once a year, at the Budget. This change will ease short-term market pressures and make for an easier life for the chancellor and her colleagues (and the IFS welcomes this). So this time round the OBR won't be marking her fiscal headroom - though others will give their opinion.

What are Reeves’s fiscal rules?

The first concerns “current spending” - teachers’ wages, drugs for the NHS, and so on - which is to be matched by tax revenues by 2029-30.