Reeves is warned her ‘dysfunctional’ policy on fiscal rules is hindering the economy

Chancellor’s approach likened to ‘watching speedometer while ignoring whether brakes are working’ NewsUKUK PoliticsReeves is warned her ‘dysfunctional’ policy on fiscal rules is hindering the economyChancellor’s approach likened to ‘watching speedometer while ignoring whether brakes are working’Kate Devlin Whitehall Editor Thursday 19 February 2026 00:01 GMTBookmarkCommentsGo to commentsBookmark popoverRemoved from bookmarksClose popoverRelated: Rayner calls for Starmer to appoint minister for night-time economyYour support helps us to tell the storyRead moreSupport NowFrom reproductive rights to climate change to Big Tech, The Independent is on the ground when the story is developing. Whether it's investigating the financials of Elon Musk's pro-Trump PAC or producing our latest documentary, 'The A Word', which shines a light on the American women fighting for reproductive rights, we know how important it is to parse out the facts from the messaging.At such a critical moment in US history, we need reporters on the ground. Your donation allows us to keep sending journalists to speak to both sides of the story.The Independent is trusted by Americans across the entire political spectrum. And unlike many other quality news outlets, we choose not to lock Americans out of our reporting and analysis with paywalls. We believe quality journalism should be available to everyone, paid for by those who can afford it.Your support makes all the difference.Read moreRachel Reeves should scrap her self-imposed rules on debt and borrowing in order to halt the “dysfunctional” policymaking behind Britain’s economic uncertainty, the Institute for Fiscal Studies (IFS) has said. In a major blow to the chancellor, the think tank said the current system “isn’t delivering” and that Reeves’s fixation on sticking to her fiscal boundaries – which prevent her from borrowing to pay for day-to-day spending, and require debt to fall as a percentage of GDP by 2029/30 – means she could break her promise to deliver sustainable public finances. In a scathing assessment of her strategy, the economists likened her approach to a driver looking at the speedometer “while ignoring ... whether or not the brakes are working”.The IFS said policies that affect millions of Britons are too easily swayed by “volatility” in economic forecasts, adding to wider financial uncertainty and leaving longer-term challenges ignored.Its warning comes despite Wednesday’s news of a surprise drop in inflation, and less than a fortnight before the chancellor delivers her spring statement setting out the latest forecasts for the UK economy. So far, Labour has failed to achieve the growth promised by Ms Reeves and Sir Keir Starmer when Labour came to power. The economy stuttered to a near halt at the end of last year, following Budget uncertainty in November, rising by a meagre 0.1 per cent in the final three months, while figures released on Tuesday showed that the unemployment rate had hit its highest level for five years. open image in galleryRachel Reeves is the target of scathing criticism from the Institute for Fiscal Studies (PA)The chancellor came under fire last year after she dramatically abandoned plans to raise income tax in the Budget at the eleventh hour, days after apparently signalling that the move was necessary to meet her fiscal rules. Looking at a broader range of indicators of how the economy is performing would reduce the incentive for governments to “contort policy” to meet the rules, the IFS said. The think tank also warned that the credibility of the fiscal rules imposed by successive chancellors, including Ms Reeves, in a bid to reassure financial markets over the UK’s economic plans, has been undermined by “aggressive ‘gaming’ of rolling targets”. Ms Reeves has always said that her fiscal rules are “non-negotiable”, but in the past, she has been accused of playing “the same silly games” as her predecessors to make the numbers balance to meet her rules.The IFS said: “This fixation [on the amount of headroom against the fiscal rules] is increasingly contributing to a dysfunctional policymaking process. Meanwhile, aggressive ‘gaming’ of rolling targets and frequent changes to the rules have undermined their credibility. Nor is the framework delivering on its promise of sustainable public finances.”The report warned that inflexibility around the rules means that whenever forecasts change, and policy has to adjust, “volatility in the forecasts translates into volatility in policy. This makes for rushed and lower-quality tax and spending policy, and adds to economic uncertainty.”Ben Zaranko, associate director at the IFS, said the system was “like being behind the wheel of a car and judging whether or not you’re driving safely solely by looking at the speedometer, while ignoring the traffic conditions, the weather, and whether or not the brakes are working”. Helen Miller, director of the IFS, said: “It’s important for all our futures that policies are well designed and that the public finances are sustainable, but the UK’s current fiscal framework