UK Chancellor George Osborne will announce plans to create a law banning future governments from running a deficit.
The UK’s chancellor of the exchequer, George Osborne, will use his yearly speech at Mansion House the evening of June 10th to announce plans to introduce a law that forces future governments to run a budget surplus. It will effectively require governments to stop spending all the taxes and money it collects in “normal” economic conditions, instead saving some for times of hardship.
It’s a rare move that stems from the years of running high and unsustainable national debt levels. According to reports from the media, Osborne’s proposed legislation will be policed by the Office for Budget Responsibility who will have the power to relax spending commitments under certain conditions - such as a recession.
"In the budget, we will bring forward this strong new fiscal framework to entrench this permanent commitment to that surplus, and the budget responsibility it represents," Osborne is due to say in the speech.
"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.
“With our national debt unsustainably high, and with the uncertainly about what the world economy will throw at us in the coming years, we must now fix the roof while the sun is shining."
However, it’s a tough and perhaps ambitious demand from the chancellor, as few governments have been able to limit spending to only include what they collect in taxes. It’s definitely not been seen since George Osborne took office in 2010, as the March 2015 outlook put the deficit at 3.3 per cent of GDP for the 2014/15 financial year.
Despite this, Mr Osborne remains optimistic of creating a permanent change to how the UK approaches fiscal responsibility “just as they have done in recent years in countries like Sweden and Canada,” he will explain.
"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."
Mr Osborne and the Treasury will outline further details of the plan on July 8th, alongside updated borrowing and growth forecasts, when the chancellor will present the first all-Conservative Budget since 1997.
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