The key point the Bank want to make is that everyone focuses on the purple diamonds (the cashflow losses, i.e. payments from the Treasury to cover losses made by the Bank via the APF). But if you factor in the turquoise bars, the net fiscal impact doesn't look so bad (and might even be positive).

Yes, agreed. Which is why I think we should seriously consider moving away from numerical pass/fail rules assessed against a point estimate of an uncertain forecast. But now is not a good time to make that switch, and more headroom + other tweaks would be a short-term improvement.

Bit more info on how the authors of the QJE paper construct their policy uncertainty index: by counting mentions of key words/phrases in newspapers. The approach for the UK is similar.

Do we really think uncertainty around policy was more pronounced in spring 2025 than in mid-2020..?

Full paper (which is interesting and extraordinarily well-cited) here

academic.oup.com/qje/article-...

A final point: this is a nice chart but I'm not entirely convinced by the measure of policy uncertainty. Baker et al construct this by counting the number of times a couple of UK newspapers use phrase certain phrases (like “economic uncertainty”).

Where's the pandemic spike?!

And as for the “one fiscal event, two forecasts” problem, I think a more fruitful avenue would be to apply the fiscal rules as a range between fiscal events (as HMT already plan to do from 2027)

ifs.org.uk/articles/how...

I wholeheartedly agree that we should change fiscal policy only once a year, and that we need to end this vicious cycle of speculation. But that's largely a function of the decision to operate with minimal “headroom” against a pass-fail rule. That's a policy choice we could undo.

Lots more for the fiscal nerds in here ifs.org.uk/publications...

These assessments are *extremely* sensitive to the forecast for GDP growth. But under the Barclays economic forecast, we'd be missing the debt rule by £17bn (more than the amount by which we'd be missing the borrowing rule). Cutting/reprofiling capital spending plans could help to meet this.

If you're a government seeking to reduce debt as a share of GDP, it's nominal growth that matters. The chart was created to show why it's difficult to get debt down at present. So it's entirely suitable for the question at hand. There's no misdirection.

It's quite helpful if you're trying to reduce government debt!

That very high nominal growth 74-79 was in large part due to very high inflation, which has its own problems...

I think you should listen to the podcast, Edward

Best followed up with this FT podcast with
@timleunig.bsky.social who has a nice example of why zero-rating things like food and children's clothing isn't a particularly effective way of supporting poorer households

www.ft.com/content/33d7...