Rachel Reeves’s fiscal rules buffer should be ‘significantly larger’, say peers

Rachel Reeves should aim to run a “significantly larger” buffer against her fiscal rules, according to a report from a House of Lords committee that says the UK’s public debt is on an unsustainable trajectory. The chancellor raised taxes at last year’s budget in order to more than double the “headroom”, or buffer, against her fiscal rules to £22bn – some of which is expected to be eroded by the impact of the Iran war. But the Lords economic affairs committee says Reeves should aim to raise it more, and complains that she and her recent predecessors have tended to allow themselves too little room for manoeuvre, compared with the £30bn average between 2010 and 2022. “Despite the recent increase in the size of the buffer, it remains at an historically low level and further substantial increases are still required,” it says. “Significantly larger buffers must become the norm.” It criticises successive governments for treating fiscal buffers as “war chests” to be run down to a minimum, “with all the destabilising implications for potentially chaotic policy change this brings”. The high-powered committee, chaired by the Labour peer Stewart Wood, includes the former Treasury permanent secretary Terry Burns, the economist Alison Wolf, and the former chancellor Norman Lamont, who has stepped down since the inquiry into the UK’s fiscal framework was completed. …