IFS Report: 'From fiscal rules to fiscal traffic lights: rethinking the UK fiscal framework'
'In other words, the current framework means that macroeconomic volatility is mainlined into policy volatility, which adds unnecessarily to economic uncertainty and makes good policymaking less likely. There is also a problem of asymmetry: when the forecast improves, any additional ‘headroom’ is typically treated as free money and happily spent. Yet when the forecast worsens, the rules tend to get changed or ‘gamed’: Chancellors of all political stripes have proved adept at promising future tax rises or spending cuts which are unlikely to be delivered, but which allow them to meet the letter of their rolling fiscal targets.
All this is to say, the current framework is not delivering good outcomes. It is not achieving sustainable public finances, it has limited credibility with financial markets, and it is not creating the conditions for good policymaking or for a high-quality public debate about the important issues at play. It seems likely that any framework, left in place for long enough, will start to create problems in practice, as unhelpful norms emerge and actors find ways to game the system. Just as the tendency of HM Treasury to fudge its forecasts in the 2000s was one reason for the creation of the OBR as a corrective mechanism, the dysfunction around the current framework necessitates a change in thinking and approach.'
'Fixation upon - lived [ equilibrium ] experience 'RAG' assessment of patients in mental health services - caseload management | fiscal headroom' GOOD - BAD PASS - FAIL Equilibrium Outcomes  | ||
Public Policy Interviews sustainable public finances good policymaking (here) high-quality public debate Cost of Living |
Policy |
My source: Valentina Romei, IFS urges end to fixation on fiscal 'headroom', Financial Times, 19 February, 2026, p.3.
Images: IFS
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