Reeves's fiscal boundaries hinder economy, says IFS

Rachel Reeves should scrap her self-imposed rules on debt and borrowing in order to halt the “dysfunctional” policymaking behind Britain’s economic uncertainty, the Institute for Fiscal Studies (IFS) has said.

- KATE DEVLIN

In a major blow to the chancellor, the think tank said the current system "isn't delivering" and that Reeves's fixation on sticking to her fiscal boundaries - which prevent her from borrowing to pay for day-to-day spending, and require debt to fall as a percentage of GDP by 2029-30 - means she could break her promise to deliver sustainable public finances.

In a scathing assessment of her strategy, the economists likened her approach to a driver looking at the speedometer “while ignoring ... whether or not the brakes are working". The IFS said policies that affect millions of Britons are too easily swayed by "volatility" in economic forecasts, adding to wider financial uncertainty and leaving longer-term challenges ignored.

Its warning comes despite yesterday's news of a surprise drop in inflation, and less than a fortnight before the chancellor delivers her spring statement setting out the latest forecasts for the UK economy.

So far, Labour has failed to achieve the growth promised by Ms Reeves and Sir Keir Starmer when Labour came to power. The economy stuttered to a near halt at the end of last year, following Budget uncertainty in November, rising by a meagre 0.1 per cent in the final three months, while figures released on Tuesday showed that the unemployment rate had hit its highest level for five years.