Fortifying the Fiscal Framework (Economic Affairs Committee Report)

Baroness Wolf of Dulwich Excerpts

Tuesday 3rd November 2026 Grand Committee

[Baroness Wolf of Dulwich (CB)]

My Lords, as a member of the committee that produced this report, I express my gratitude to the noble Lord, Lord Wood, and to the committee staff. I thank the noble Lord, Lord Liddle, for his excellent chairmanship of the committee and his opening remarks.

I shall make four points. First, when our committee decided to undertake this inquiry, the OBR was experiencing unprecedented levels of publicity and criticism. You would have thought it was directly responsible for the country’s challenging and deeply worrying fiscal situation, rather than consisting of analysts and messengers. A year later, after another Budget, that seems no longer to be true; if there were widespread attacks this year, I missed them. I think that this is because, in the meantime, and in no small part because of the OBR’s work, far more people are aware of our ever-growing national debt and the state of our public finances.

However, while this growing recognition in Westminster and the country is welcome, we are not doing anything very significant about it. To quote the executive summary of the OBR’s own October report, in classically somewhat bland language:

“The UK’s economic and fiscal position remains very challenging”.


It points out that weak growth and government borrowing have resulted in a sharp increase in government debt while debt interest spending is expected to grow yet again by billions of pounds.

Observers of the Budget regularly point out how bizarre it is that so much time and national attention goes on whether or not the Chancellor of the Exchequer is using up her or his headroom, an amount that is a tiny proportion of total public expenditure. However, the reason for this is that we are in fact in hock to the bond markets and in an unnecessary situation where small changes in interest rates are a major daily concern for the Government because of their impact on total debt interest.

Secondly, it is perfectly possible to reduce the national debt. In 1946, after the Second World War, the national debt reached 252% of GDP, but by 2006 it was down to 36%. As our committee has argued in this report, and in its previous 2024 report on debt, we really have to act.

Thirdly, I underline the hugely valuable work done by the OBR in producing its Fiscal Risks and Sustainability reports. As we said in our report, these reports get far too little attention, but, if you want to understand what is going on with the public finances, they are an essential source; I commend them to everybody.

Fourthly, there is a concrete change that this Government and future Governments could, and should, make; in my view, it is the single most important recommendation in this report. The Government should set out an additional debt target that will show cumulative performance over three years, such that, in normal times, debt in the third year is lower than in the first year. That should be easily monitored and clearly understood by the general public. However, this has not been our recent experience. This October’s economic and fiscal outlook predicts that, in 2029, public sector net debt as a percentage of GDP will, again, be significantly higher than was forecast just six months ago.

We are hardly the only people to observe that, all too often, the current and recent fiscal rules allow ample room for gaming the debt target. As a former member of the Budget Responsibility Committee confirmed to us, as a witness,

“you can have debt rising for ever”

and still meet most of the targets that the Government have set for themselves and observe their rules. The committee criticised this situation in 2024, but nothing happened. We called for change in this report, but the Government’s response to our report said:

“The Government has been clear that the fiscal rules are non-negotiable”—


end of subject. Well, the rules may be non-negotiable, but it is beyond time for them to change and for them to be discussed publicly and widely. We need a cross-party commitment on our fiscal framework, including a clear, easily monitored commitment to ongoing debt reduction—and sooner rather than later.