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UK Gov't To Legislate For Balanced Budgets

by Robert Lee,, London

11 June 2015

The UK Government will introduce legislation to require future administrations to run budget surpluses in "normal times," Chancellor George Osborne has announced.

In his annual Mansion House speech, Osborne said: "The result of this recent British election – and the comprehensive rejection of those who argued for more borrowing and more spending – gives our nation the chance to entrench a new settlement. A settlement where it is accepted across the political spectrum that without sound public finances, there is no economic security for working people; that the people who suffer when governments run unsustainable deficits are not the richest but the poorest, and that, therefore, in normal times, governments of the left as well as the right should run a budget surplus to bear down on debt and prepare for an uncertain future."

He added that in next month's summer Budget, he will bring forward a "strong new fiscal framework to entrench this permanent commitment to that surplus, and the budget responsibility it represents." The proposals will be assessed by the Office for Budget Responsibility, and voted on by the House of Commons later this year.

John Cridland, Director-General of the Confederation of British Industry (CBI), commented: "Business wants the Government to aim for an absolute budget balance over the economic cycle, so the Chancellor's plans will be well-received. This will create a platform for the fiscal discipline required to keep national debt as a share of GDP on a downward trajectory and provide the flexibility to deal with economic shocks."

"Underpinned by clear fiscal rules, we must get on top of the public finances in a way that is growth-friendly. The heavy lifting must come from savings to current spending so we need a step-change in the approach to public service reforms, while prioritizing growth boosting spending, such as capital investment and innovation."

TAGS: tax | investment | fiscal policy | budget | United Kingdom | legislation

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