Economics viewpoint Reeves must rethink how fiscal policy is set

There are many lessons for Labour's bruised leadership from last week's embarrassing U-turn on welfare cuts, but one is surely that how - and when - fiscal policy is set is not working.

- Heather Stewart

Binary fiscal rules, a slim margin for error (less than £10bn), and the Office for Budget Responsibility's twice-yearly forecasts have combined to turn tax and spending decisions into a grim spectator sport.

City analysts are constantly second-guessing exactly how Rachel Reeves's hand will be forced next. As the Bank of England governor, Andrew Bailey, put it last week before the benefits climbdown, "having the financial markets marking fiscal policy to market on a daily basis is not a good state of affairs".

The chancellor promised to hold only one budget a year, at which tax changes would be announced - a decision aimed at demonstrating stability and strength.

However, the Treasury began signalling during the bond market panic in January that she was prepared to use her spring statement to make spending cuts, if higher interest costs set her on course to break her fiscal rules.