UK Parliament's House of Lords Economic Affairs Committee urges an additional debt target and larger fiscal buffers to fortify the fiscal framework

The UK Parliament’s House of Lords Economic Affairs Committee has published a report on the UK’s fiscal framework, warning that the current fiscal rules can be complied with without delivering a lasting reduction in debt and that, on current tax and spending settings, the UK is on a path to unsustainable debt levels. The committee also argues that political focus on short-term rule compliance has distracted from the longer-term debt dynamics the framework is meant to influence. To strengthen credibility, the committee recommends an additional commitment so that, in normal times, debt in the third year is lower than in the first year, rather than relying solely on a rolling forecast requirement for debt to be falling in year three. It calls for substantially larger fiscal buffers to reduce the risk of non-compliance driven by forecast error and to avoid an excessive preoccupation with “headroom”. The report also cautions that repeated changes to fiscal rules have undermined the framework’s credibility and says any future changes should be developed through an in-depth consultation in a period without formal political campaigning. On the Office for Budget Responsibility (OBR), the committee rejects claims that it “polices” government policy, describing it instead as an independent referee assessing compliance with self-imposed rules, and recommends maintaining two forecasts per year while adjusting the timing of the Spring forecast so the gap between forecast events is closer to six months.