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Government targets or constraints for public finances, defined using specified measures and periods such as a budget balance or debt ratio.
Save conceptFiscal rules specify targets or limits for government finances. They can concern a budget balance, borrowing, spending or debt. Their effect depends on the exact definitions and the period measured. A rule about day-to-day spending is different from one about all spending, because investment may be treated separately. The rule’s wording must be read before judging whether a forecast meets it.
Governments set tax and spending plans, and forecasts estimate the financial outcomes those plans could produce. The projected outcome is then compared with the applicable rule. This can constrain choices or provide a benchmark for accountability. The forecast still relies on economic assumptions and on delivery of the planned policies; a rule does not cause those assumptions to become true.
Imagine a rule requires ordinary annual spending to be covered by annual receipts in a specified future year. A hypothetical plan can satisfy that rule by changing taxes, spending or both. If investment is outside the rule’s spending definition, borrowing for investment may be assessed under another constraint instead. This example explains why the scope matters; it is not a statement of every rule used in the UK.
Meeting a forecast target does not mean the future accounts have already been balanced. Nor does it show that all public services will achieve the intended quality. A government could rely on savings that prove difficult or revise its policies later. Credibility therefore depends on the underlying plan as well as the arithmetic of the rule. measures the forecast buffer relative to that constraint.
IFS urges credible UK spending plans as inflation adds budget pressure