The tenth set of rules

Politicians talk about the fiscal rules the way sailors talk about the tide. An external law of nature. Something you work around, because you certainly can’t argue with it.

So it’s worth knowing where they came from. Britain’s fiscal rules were invented in 1997 by Gordon Brown in his first budget as Chancellor.

There were two. The golden rule: over the economic cycle, the government would borrow only to invest, never to fund day-to-day spending. And the sustainable investment rule: public sector net debt would be held at a stable and prudent level, which in practice meant below 40% of GDP.¹

Before 1997 there were no numerical fiscal rules at all. None. Just conventions — an instinct towards balanced budgets, sometimes paying down debt when times were good. Britain built the NHS, the motorway network and millions of council homes without any of the constraints we are now told make such things impossible.

Text description of the 10 sets of rules infographic.

10 sets of UK fiscal rules, by year introduced, year abandoned, and chancellor:

• Set 1: 1997 to 2008, Gordon Brown
• Set 2: 2009 to 2010, Alistair Darling
• Set 3: 2010 to 2014, George Osborne
• Set 4: 2014 to 2015, George Osborne
• Set 5: 2015 to 2016, George Osborne
• Set 6: 2016 to 2019, Philip Hammond
• Set 7: 2019 to 2020, Sajid Javid then Rishi Sunak
• Set 8: 2021 to 2022, Rishi Sunak
• Set 9: 2022 to 2024, Jeremy Hunt
• Set 10: 2024, still in force, Rachel Reeves

Source: Institute for Government, fiscal rules in the UK since 1997; House of Lords Economic Affairs Committee.

Brown’s rules lasted eleven years, and were abandoned in 2008 when the financial crisis hit. Since then the churn has been relentless. The rules Rachel Reeves set in October 2024 were, by the Institute for Government’s count, the tenth set Britain has had. We change our fiscal targets more often than any other country in the world.²

Of the twenty-six individual rules in place before the current set, only eleven were met or on course to be met at the point they were abandoned. Every set of rules since 2008 has been dropped because at least one part of it could not be delivered.

“This is not a story about weak-willed chancellors. It is a story about a system that produces absurdity as a matter of routine — and Britain’s most establishment fiscal institution, the IFS, has said so out loud.”

In November 2024 the Institute for Fiscal Studies examined how the rules shape decisions. It called the position “patently ridiculous,” and described the idea that £2 billion of forecast changes five years out should drive policy today as “almost literally mad.” It pointed out that the OBR is obliged to treat the Treasury’s stated future plans as fact — including the annual assumption that fuel duty will rise with inflation, which it has not done for fourteen years, and £20 billion of public service cuts with no indication of where they might fall.³

By February 2026 the IFS had gone further, proposing to replace the framework altogether and criticising what it called “an unhelpful obsession with fiscal headroom.”

To be scrupulous: the IFS is not endorsing the programme in this report.⁴ But on the narrow question of whether these rules produce sensible government, one of Britain’s most respected fiscal institutions and this report agree.

In 2024 Reeves called her rules non-negotiable. When Andy Burnham suggested breaching them, she said he risked going the way of Liz Truss. Meanwhile her own headroom moved from £9.9 billion at the October 2024 budget to over £22 billion by November 2025 — not by changing the rules, but by changing taxes and spending until the numbers fitted back inside them. She valued the rules more than the real world effect of the policies.⁵

And Burnham? Twice he said what needed saying: that Britain has to stop being in hock to the bond markets. Once to the New Statesman ahead of the 2025 Labour conference, once in a speech to the IFS in January 2026. Then he became Prime Minister, and within days confirmed he would stick to the existing fiscal rules and look for flexibility within them.⁶

It would be easy, and wrong, to call that cowardice. The pressure on a new Prime Minister to reassure the market is enormous, and real. That is precisely the point. We can’t just ignore the bond market. We must develop alternatives to fund public investment.

Which brings us to the fact that no discussion of the fiscal rules ever seems to mention. They are self-imposed. No treaty requires them. No market demands them. No law of economics produces them. A chancellor wrote them down, and every chancellor since has written a new set, and each new set has been announced as though it were carved into tablets of stone. Then changed a few years later.

So what would changing them involve?

The rules live in the Charter for Budget Responsibility. The Charter is approved by a motion in the House of Commons. That is the entire procedure. No legislation, no treaty, no consultation with anybody who trades gilts.

Since the rules are rewritten whenever they are missed, they are not meaningful fiscal discipline. Real fiscal discipline requires sending a signal to the market that is not political noise. Like, “for the next twenty years we will fund and build 100,000 council houses a year.” Not, “we will empower the private sector to build more homes,” but we will make sure it happens, backed with hard cash. That kind of discipline grows our asset base by 100,000 homes a year, strengthening the balance sheet.⁷

The whole point of fiscal discipline is to provide certainty.