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Continue with the fiscal rules announced in the 2017 autumn statement

Last updated: 08:51pm 16 December 2019

We will continue with the fiscal rules announced by the chancellor in the autumn statement last year, which will guide us to a balanced budget by the middle of the next decade.

Conservative Party Manifesto 2017, p.14

Our verdict

In his 2016 Autumn Statement, Chancellor Philip Hammond announced a new set of fiscal rules to shore up public finances:

  •  reduce net borrowing (deficit) to below 2% of GDP by 2020-21
  •  public sector net debt as a percentage of GDP to be falling in 2020-21
  • welfare spending must be within a cap, set by government

These were approved by Parliament in January 2017, and were a core element of the 2017 Autumn Budget. This is a pledge to continue to apply these fiscal rules, with the objective to deliver a balanced budget by 2025.

In October 2019, a Parliamentary Briefing helpfully outlined the situation regarding each of the rules. It found:

  • The fiscal mandate to bring the deficit below 2% of GDP was on course to be met when the Office for Budget Responsibility (OBR) made its assessment in March 2019. However, events since then have led the Institute for Fiscal Studies (IFS) and the Resolution Foundation to say the fiscal mandate is likely to be missed at the next forecast point.
  • The public sector debt target is being met.
  • The welfare cap target is only formally assessed “in the first fiscal event of a new Parliament”. The last assessment was at the Autumn Budget 2017. However, the government is currently maintaining welfare spending within the pathway it has set for this target.

The government has continued to follow the 2017 fiscal rules, but its latest plans, outlined in the September 2019 Spending Round, have led many observers to suspect the rules are about to be broken. Containing a supplementary promise to balance the budget by 2025, this pledge was never going to be ‘done’ within the government’s term of office. However, the fiscal rules were maintained until Parliament was dissolved ahead of the December 2019 general election, so we’re giving this a status of ‘in progress’.

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