The UK’s fiscal rules do not work

Can the Burnham government’s first budget honour the fiscal rules inherited from its predecessors – and should it even try?

Professorial Research Fellow Iain Begg argues in a new commentary for the Official Monetary and Financial Institutions Forum (OMFIF) that the rules do not work, and the Chancellor should be bold enough to rewrite them.

With average public deficits of 5.3% of GDP across 2022/23 to 2025/26 and a debt ratio that rose through the pandemic and has barely fallen since, Begg sets out three reforms: a public debt benchmark, with annual progress required towards it; explicit ceilings on public expenditure; and borrowing to foster growth, with independent verification. While changing the rules will draw criticism from all sides, Begg argues the markets may reward a framework oriented to deliver fiscal sustainability.