What does the pledge mean?

‘Fiscal rules’ are rules, or targets, imposed by governments on themselves in order to constrain decisions on taxes and public spending.

Labour’s fiscal rules were announced by then-shadow chancellor Rachel Reeves ahead of the 2024 general election, and included in the party’s manifesto. They were restated by the government in the Autumn Budget in October 2024, and included in the Charter for Budget Responsibility, which was approved by Parliament in January 2025.

The current fiscal rules have two main components. The first commits the government to ensuring that day-to-day public sector spending is met by revenues from taxes and other sources by 2029/30—meaning the government would only borrow to invest.

The second is that debt must be falling as a share of the economy by 2029/30 when compared to the previous financial year.

It’s worth noting that after 2026/27 the timescale for these targets will change, and they will instead apply to the third year of a rolling forecast.

A separate third rule also requires that certain types of welfare spending must be below a specified level—called the welfare cap—which is set at £194.5 billion by 2029/30.

The first two of these rules are those mentioned specifically in Labour’s manifesto, and therefore it is progress in keeping those rules “non-negotiable” which we’re assessing here. However it’s worth noting that the way in which the fiscal rules measure debt has changed under Labour.

Between 1997, when then-chancellor Gordon Brown formalised the need for a government to set its own fiscal rules, and 2022, the government measured public debt as public sector net debt (PSND). A related measure was used between 2022 and 2024, which excluded the Bank of England’s balance sheet (PSND ex BoE).

But in the Autumn Budget 2024, Ms Reeves announced a new measure of public debt for the government’s fiscal rules, public sector net financial liabilities (PSNFL). This metric includes the Bank of England, but also includes a broader range of financial liabilities (such as public sector pensions) and financial assets (such as student loans) than the PSND measure.

Some commentators suggested this change was made to provide additional headroom for capital expenditure, although others have backed the new measure as better capturing the value of the public sector’s long-term financial assets.

It’s worth noting that before the election Ms Reeves was reported to have promised to keep the same measure of debt that had previously been used by the Conservatives, which was not what happened. (We’ve asked Labour about this but did not get a response.) However, here we’ve rated progress based on the pledge in Labour’s manifesto itself, which did not detail which measure of debt would be used.

What progress has been made?

We’re currently rating this pledge as “appears on track”. The latest Office for Budget Responsibility (OBR) forecast, published on 3 March 2026, the day of the Spring Forecast, suggests the government is on track to meet its fiscal rules as set out in the Labour manifesto.

The OBR says its central forecast shows the current budget deficit is set to go from 1.6% of GDP this year to a surplus of 0.7% in 2029/30 and 0.8% in 2030/31.

PSNFL is forecast to rise from 82.4% of GDP this year to a peak of 82.9% in 2027/28, before falling to 81.1% at the end of the forecast.

Public sector net borrowing is forecast to fall from 4.3% of GDP this year to 1.6% in 2030/31. The OBR said this “slightly faster pace of decline” than in its forecast for the 2025 Budget is “largely due to an improved receipts forecast”.

It also said public sector net debt is “expected to be broadly stable over the forecast”, going from 94.5% of GDP this year to 96.5% in 2028/29 before falling to 95% in 2030/31, marginally lower than November’s forecast.

The OBR has warned, however, that the “fiscal context for the next Budget will remain challenging”, and said there are “significant risks” around the central forecast, “with plausible outcomes both substantially above and below the central projection”. It said: “Conflict in the Middle East…could have very significant impacts on the global and UK economies”, and that other factors such as trade policy developments and changes in equity prices and interest rates are “key risks within the economy forecast”.

The OBR’s previous forecast noted that while the 2025 Budget increased the chancellor’s headroom, from the £9.9 billion of the 2025 Spring Statement and Autumn Budget 2024 to £21.7 billion, the Budget “still leaves the public finances relatively vulnerable to future shocks”.

Ms Reeves announced in the 2025 Budget that going forward the UK’s fiscal rules will only be assessed once a year, at future Budgets, rather than twice a year.

That means that March’s OBR forecast doesn’t contain an assessment from the body on whether or not the government is on track to meet its fiscal rules.