Thu, 19 Feb 2026

Thu, 19 Feb 2026 Reeves fixated on 'dysfunctional' borrowing rules, says IFS

The think tank suggests the chancellor's fiscal rules need to shift the focus from one key figure.
A leading think tank, the Institute for Fiscal Studies (IFS), has criticized Chancellor Rachel Reeves' borrowing rules, saying they are causing "dysfunctional policymaking". The IFS claims that Reeves' approach to fiscal policy is too focused on meeting specific targets, rather than prioritizing long-term economic growth. The IFS suggests that the UK would be better served by a new framework based on "fiscal traffic lights", which would allow for a broader assessment of the government's overall financial position. This system would replace the current rules-based approach and provide more transparency and accountability. According to the IFS, the current borrowing rules are too rigid and lead to aggressive "gaming" of targets by governments. The think tank argues that this is undermining the credibility of the fiscal framework and failing to deliver sustainable public finances. The Treasury has defended the current rules, saying they help keep interest rates low and prioritize investment in long-term growth. However, the IFS says that the government's approach needs a rethink to prioritize economic sustainability over meeting specific targets. Research by the IFS found that the UK's fiscal headroom - the amount of room for manoeuvre in tax and spending plans - is expected to be £22 billion in five years' time, up from earlier forecasts. The think tank argues that this is due to the government's focus on meeting specific targets rather than prioritizing long-term economic growth. The IFS has called for a debate on public finances ahead of the next general election, arguing that the current framework is not delivering sustainable outcomes.
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