UK Treasury: Future governments must run budget surplus
The UK wants to pass a law forcing future governments to maintain a budget surplus as long as the economy is in “normal times”.
Currently, the government is committed to balancing day-to-day spending – the structural current deficit – by 2017-18.
But in his annual speech in London about the state of the British economy, the UK’s finance minister George Osborne will today say that “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.”
Whether the country is in “normal times” or not shall be determined by the Office for Budget Responsibility – the UK’s independent economic forecasting body.
If passed, the law will further tie the hands of UK Treasury officials who are already restricted by the ruling Conservative party’s pledges to ban increases in the main rates of income tax, national insurance and VAT until 2020.
The Conservatives made these tax commitments in the run-up to last month’s general election, which they unexpectedly won with a slim majority of parliamentary 12 seats.
Similar budget laws exist in other countries, including Singapore, where, although the constitution states that governments must run a balanced budget – not a surplus – it also stipulates that this should happen at all times.