Por Renan Filho · 2026-09-26On 25 September, the Chancellor of the Exchequer unveiled the so-called Fiscal Responsibility Bill in the House of Commons, touting it as a crucial step towards stabilising the nation's finances. The Bill sets a new fiscal mandate requiring debt to fall as a share of GDP within five years, alongside a cap on day-to-day spending growth. Yet within hours, the Office for Budget Responsibility published its latest fiscal outlook, revealing that the government's own assumptions rely on continued high taxation and optimistic growth forecasts that many independent economists have called unrealistic.
The OBR's central projection shows public sector net borrowing remaining above £120 billion for the next three financial years, while the tax burden is set to climb to 38.2% of GDP by 2027–28 — the highest sustained level since the post-war period. This is not fiscal responsibility; it is fiscal camouflage. The Bill contains no meaningful restraint on the size of the state, no significant departmental spending cuts, and no serious plan to reduce the regulatory burden that chokes small businesses and dissuades investment. Instead, it offers a collection of accounting adjustments and target redefinitions designed to give the appearance of discipline without the pain of reform.
Why this matters to every British taxpayer is simple. The government is taking an ever larger share of national income while delivering poor value for money. According to the Office for National Statistics, public sector productivity has fallen by an average of 0.5% per year since 2019. The NHS waiting list in England stands at 7.6 million, virtually unchanged from a year ago despite a 12% real-terms increase in health spending. Meanwhile, the UK's private sector investment intensity — gross fixed capital formation as a share of GDP — remains among the lowest in the G7, at just 17.3%, well below the United States (21%) and Germany (20%). The state's voracious appetite for funds crowds out the very investment needed to raise living standards.
From a liberal-conservative vantage point, the Bill is a missed opportunity. A genuinely responsible fiscal strategy would start not with higher taxes or tweaked targets, but with a systematic overhaul of public spending. Too many government programmes are neither effective nor efficient. The Department for Levelling Up, Housing and Communities, for example, has spent £14 billion on regeneration projects since 2020, yet the ONS reports that housebuilding starts in England have fallen to their lowest level since 2013. The state spends abundantly, but it spends badly. Rather than empowering local communities through lower taxes and deregulation, the government centralises, taxes, and recycles inefficiency.
Counterpoint: advocates of the Bill argue that without a credible medium-term plan, bond markets would penalise the UK with higher borrowing costs, and that the new mandate provides certainty for businesses and investors. They point to the OBR's expectation that debt will peak at 98.6% of GDP in 2026–27 before gently declining. Yet this narrative ignores the fact that the majority of the projected debt reduction is driven by the assumption of robust productivity growth — precisely what has been absent for a decade. If growth disappoints, the targets will be missed and the Chancellor will be forced to choose between even higher taxes or a sudden austerity that hurts the vulnerable. The Bill, in short, substitutes hope for strategy.
A more principled approach would involve rolling back the state in areas where it has demonstrably failed, such as the costly and centralised NHS procurement system or the complex welfare bureaucracy that traps thousands in dependency. Free-market economists have long proposed replacing income tax with a flatter, simpler system; abolishing the hated inheritance tax; and removing the planning restrictions that stifle housing supply. None of these appear in the Bill. Instead, the government will continue to spend £60 billion a year on debt interest alone — a sum larger than the entire defence budget — without any serious plan to shrink that burden through lower borrowing.
The Chancellor, in a statement to the press, insisted that the Bill represents a ‘new era of fiscal discipline’. The data say otherwise. Until the government learns that the state's size matters just as much as its deficit, the phrase ‘fiscal responsibility’ will remain an empty slogan.
**1. Will the Fiscal Responsibility Bill actually reduce the national debt?** Only if the optimistic growth forecasts materialise. The OBR itself notes that its central projection relies on productivity growth of 1.2% per year — well above the 0.6% average since the financial crisis. If growth disappoints, debt will continue to rise. The Bill's targets are not binding; they are political pledges that can be changed with a simple majority vote.
**2. What alternative policies would a liberal-conservative government pursue?** The core principle is to shrink the state to make room for the private sector. That means deep cuts to wasteful programmes, a radical simplification of the tax system, and sweeping deregulation in housing, energy and planning. Only by reducing the tax burden and freeing enterprise can the UK achieve the sustained growth needed to genuinely lower the debt-to-GDP ratio without crushing living standards.