Source · Select Committees · Treasury Committee
Recommendation 1
1
Paragraph: 16
The Chancellor’s fiscal rules are reasonable in the context of the pandemic and its effects.
Conclusion
The Chancellor’s fiscal rules are reasonable in the context of the pandemic and its effects. The Chancellor has set his primary fiscal rule to target the overall stock of Public Sector Net Debt, with a secondary target to run a balanced annual current spending budget. Previous fiscal mandates had primarily targeted the annual flow of spending and focussed on the stock of debt as a secondary target. We view both of the new targets as being of equal importance, and meeting one but not the other would not constitute success.
Paragraph Reference:
16
Government Response
Acknowledged
HM Government
Acknowledged
I thank the Committee for their conclusions on the government’s fiscal strategy. The Treasury continues to monitor the risks of higher inflation and interest rates closely, and the Charter for Budget Responsibility now contains a new focus on assessing the affordability of public debt. As the Committee notes, the UK’s high level of debt means we are vulnerable to changes in macroeconomic conditions such as interest rates and inflation, which would increase the amount we spend on debt interest rather than public services. That is why the government has introduced new fiscal rules to help ensure the public finances return to a sustainable footing. Rolling fiscal rules means we can absorb some shocks and adjust fiscal policy as needed, but the government has already made tough decisions which demonstrate our commitment to keep debt under control, such as delivering a long-term, sustainable funding solution for the NHS and reform of the adult social care system.