Governments set rules that we, as citizens, must follow – laws with clear consequences for non-compliance. But they also set rules for themselves, and these can be flexible when convenient.
One such area where rules can change is the government’s approach to national debt and borrowing, known as “fiscal rules”. These are often relaxed in extraordinary times, such as during the 2008 financial crisis and the COVID pandemic. And last week, Chancellor Rachel Reeves announced a major change to the UK’s fiscal rules. But what exactly are those rules, and how are they changing?
Fiscal rules define the limits on how much the government can borrow, aiming to keep public finances sustainable. These rules have existed in various forms in the UK since 1997, with oversight from the Office for Budget Responsibility (OBR) since 2010. The OBR’s job is to examine and report on the sustainability of public finances, with particular attention to two main areas.
