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 26 November 2025, the day of the 2025 Budget, suggests the government is on track to meet its fiscal rules as set out in the Labour manifesto.

While the OBR’s forecast notes the 2025 Budget increases the chancellor’s headroom, from the £9.9 billion of the Spring Statement and Autumn Budget 2024 to £21.7 billion, it says the Budget “still leaves the public finances relatively vulnerable to future shocks”.

It also says the probability the budget will be in surplus by 2029/30 has increased in its latest forecast, compared to the March 2025 forecast, as has the probability PSNFL will be falling as a percentage of GDP in the same year (this margin is forecast to be £24.4 billion).

While PSNFL is forecast to rise from 83.1% of GDP this year to 83.7% in 2028/29, it’s forecast to fall to 82.2% in 2030/31.

The OBR said the policy measures included in the 2025 Budget increase the “current budget and PSNFL margins above the levels we forecast in March and closer to the historical average margin that Chancellors have had since 2010”.

Public Sector Net Borrowing is forecast to fall from 4.5% of GDP this year to below 2% in 2029/30. The OBR said policies included in the 2025 Budget add an average of 0.2% of GDP to borrowing over this year and the next three, but reduce it by 0.4% of GDP on average in the last two years of the forecast.

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, as is the case now.